Gustavo Javier Canavire Bacarezza and TetyanaZelenska

Presented by:Tetyana Zelenska

Georgia State UniversityMarch 4, 2009

Revisiting Chernobyl: The Long-Run Impact of the Nuclear

Accident on Earnings

Presentation Outline

Background

- Chernobyl accident: health consequences

Brief literature reviewDataEarnings function analysis- Problems of sample selectionResultsGender-wage decompositionConclusionsFuture workQuestions and comments

Chernobyl Legacy: Basic Facts

-nuclear power reactor accident near Chernobyl, Ukraine: April 26, 1986

-400 times greater than atomic bomb explosion at Hiroshima and Nagasaki

-General public was unaware of the accident until 3 days later

-high levels of radiation in the neighboring countries, as well as in Sweden, Germany, Japan, the U.S. and Brazil

-5 million people in Ukraine, Russia, and Belarus were residing in the contaminated areas

-380,000 people were evacuated and resettled

-by some estimates, the accident will cost Ukraine around $200 billion by 2015

-To the best of our knowledge, this is the first study examining the long-run impact of the nuclear tragedy on labor market outcomes

-What is the effect of the Chernobyl accident on the individual earnings?

Health ConsequencesReleased radioactive particles consisted primarily of uranium and plutonium, the most toxic of the elements; other highly radioactive fission products were iodine 131, strontium 90 and cesium 137Immediate impacts: Acute Radiation Syndrome30,000 liquidators have fallen ill“Effective dose” characterizes overall health risk due to radiation exposure (both internal and external) and is measured in the sievert (Sv), or more commonly, in millisievert (mSv) (IAER 2002). A typical range of exposure to natural background radiation is between 1-10mSv, with an average of 2.4 mSv

Health consequences, cont’dCancer: thyroid cancer in children increased 10-fold since the

accident; prenatal exposure of the thyroid gland to radioiodine may lead to developmental complications

“Chernobyl AIDS”: weakened immune system as a result of radiation exposure; more susceptible to various forms of cardiac condition and common infections, such as bronchitis, tonsillitis, and pneumonia

Mental health problems: anxiety, depression, suicidal tendencies

Direct health effects, combined with some indirect effects, such as lower human capital investment, employer discrimination, and social stigma may have a debilitating impact on the economic opportunities and labor market outcomes of the affected population. The definition of who can be classified as being in the “affected” group is ambiguous because of the complexity of the outlined impacts of radiation

Literature Review

A number of empirical studies focus exclusively on the cognitive performance of the radiation-exposed population from the contaminated areas

Almond et al. (2007) examine school performance of Swedish children, who were in utero during the Chernobyl accident and were exposed to low doses of radiation

The authors exploit the nature of Chernobyl disaster as a natural experiment and use difference-in-difference method to compare school performance of those children exposed to Chernobyl radiation to school performance of unaffected children

Children, born in one of the eight of ten most affected municipalities, were 4% less likely to qualify for school and their grade point average was 5% lower

A number of earlier studies have also found support for reduced cognitive ability in populations from contaminated areas of Ukraine, Belarus, and Russia (Lichter et al. 2000, Nyahu et al. 1998,

Data

Ukrainian Household Survey (2001): 17,000 individualsCross-sectional analysis Variables of interest: “How did the Chernobyl accident affect your health?” and “Have you received any Chernobyl benefits?”Self-reported measure

Disadvantages:-subjective measure: perception bias-does not allow for a nuanced approach to look at the effects of specific health complications

Advantages:-it embraces the physical, mental, and psychological effects of the tragedy.-self-reporting may reflect a person’s health condition more accurately, as shown in Grossman (1997)

Earnings function analysis

We estimate the basic Mincerian earnings function of the following form:

ln (Wi)= α0 + α1 CHERNOBYLi+ Xi’ α2 + εi

where ln (Wi), the natural logarithm of monthly after-tax earnings of individual i, indicator the Chernobyl accident, a vector of control variables Xi, assumed to be orthogonal to the error term;

Xi includes personal characteristics such as age, age squared, sex, education, number of years of work experience, marital status, a binary variable equal to 1 if a person reports leading an active lifestyle (exercise at least once a week); a binary variable, indicating whether the respondent is a smoker; control for living in a large city, and 27 dummy variables for the branch of the economy for the individual’s primary job

Estimating Gender Wage Gap

Since the beginning of transition, women in the FSU countries lagged behind men in terms of earnings. The difference is largely attributed to differential rewards, or discrimination.Ganguli and Terrell (2005), using Ukrainian Longitudinal Monitoring Survey, find that male-female wage gap at the bottom of the distribution fell substantially in 2003Can the impact of the Chernobyl tragedy explain a portion of the gender-wage gap?Oaxaca-Ramson decomposition (1994): ln Wf,i=β0+γ0Xf, i+ε0 (1)ln Wm,i=β1+γ1Xm, i+ε1 (2)

The difference in average wage can be further decomposed:ln Wm,i – ln Wf,i=(Xm,i-Xf,i)[Dγ1+(1-D)γ0]+[DXm,i+(1-D)Xf,i]( γ1- γ0)

where D is a diagonal matrix of weights. The decomposition divides the percentage difference between the geometric means of the observed wage rates for the two groups into 2 parts: the first due to the differences in average characteristics of the group, and second due to differences in parameters of the wage function, caused by labor market discrimination and other omitted variables. The unexplained portion is typically attributed to discrimination

Conclusion

16 years after the Chernobyl NPP accident, monthly after-tax wage of individuals who report being affected is 5 percentage points lower, ceteris paribusThe impact of the Chernobyl tragedy helps to explain a portion of the gender wage gap

What are them mechanisms?

Chernobyl affected population may have a limited access to more lucrative jobs as a result of poor health and lower human capital investment

Employer may be discriminating: a worker affected by the radiation is more likely to miss work for health-related reasons, have longer vacation and take sick leave

Negative stigma of the Chernobyl victims may also play a role

As the legacy of Chernobyl is not likely to fade and some countries continue to rely on the nuclear power as an energy source, future research should focus on the long-run impact of the accident on health, productivity and other labor market outcomes

Future Research

Rely on a less subjective measure of the Chernobyl effect- Geographic location/residence at the time of the accident- Migration patterns- Panel-level data to control for individual fixed effects

Spatial variation in the effects (southern regions are likely to have been affected the least, while northern regions are likely to have experienced the largest impact)

Looking at estimating counterfactual distribution of wages, i.e.distribution of wages that would have prevailed in the Chernobyl-affected sample if they shared the same features as non-affected sample

Questions/Comments