Health and Productivity: Panel Data Evidence from Ethiopia Abbi M. Kedir * Abstract : Neoclassical growth models and endogenous growth theories show the positive contribution of human capital to growth. Using household panel data (1994–2000) on individuals who reported their wages in urban Ethiopia, we estimated a relationship between health measures (i.e. proxied by height and BMI) and wages (which proxies productivity/growth). Our findings from the IV quantile regression estimates indicate that productivity is positively and significantly affected by education, height and BMI. The return to BMI is important both at the lower and upper end of the wage distribution. The return to height is significant only at the end of the wage distribution. The substantive content of the results (i.e. the high-nutrition and high-productivity equilibrium story) does not change even if we did not control for endogeneity of schooling. Non-parametric evidence also supports the strong and positive relationship between productivity and our indicators of human capital. 1. Introduction The specific way in which the poor participate in growth tends to be through a productive use of ‘their most abundant asset’, labour (Kanbur and Squire, 1999). The link between human development (say proxied by adult nutrition consumption and health) and economic growth can be ascertained if one finds a robust and significant relationship using data on nutrition, health and wages. 1 Therefore, identifying factors that significantly affect productivity (here measured in wages) is crucial to assist the intellectual effort that attempts to understand the mechanism through which human capital investment at the household level contributes to overall economic growth. ∗ Lecturer in Economics, Department of Economics, University of Leicester, Leicester LE1 7RH, UK. Tel: +44 (0)116 252 2894; e-mail: ak138@le.ac.uk C  The Author. Journal compilation C  African Development Bank 2009. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA. 59