SUMMARYThis paper considers the dynamics of a categorical indicator of self-assessed health using eight waves (1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998) of the British Household Panel Survey (BHPS). Our analysis has three focal points: the relative contributions of state dependence and heterogeneity in explaining the dynamics of health, the existence and consequences of health-related sample attrition, and the investigation of the effects of measures of socioeconomic status, with a particular focus on educational attainment and income. To investigate these issues we use dynamic panel ordered probit models. There is clear evidence of health-related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health. The models show strong positive state dependence and heterogeneity accounts for around 30% of the unexplained variation in health.

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This paper considers the determinants of a binary indicator for the existence of functional limitations using seven waves (1991–1997) of the British Household Panel Survey (BHPS). The focal point of our analysis is the contributions of state dependence, heterogeneity and serial correlation in explaining the dynamics of health. To investigate these issues we apply static and dynamic panel probit models with flexible error structures. To estimate the models we use maximum simulated likelihood (MSL) with antithetic acceleration and implement a recently proposed test for the existence of asymptotic bias. The dynamic models show strong positive state dependence. Copyright Springer-Verlag 2004Health dynamics, simulation-based inference, binary choice panel data models, I1, C1,