Equation (1) Equation (2) DGP Estimated coef. DGP Estimated coef. (1) (2) (1’) (2’) Dynamic Equation y1 − 1 0.3 $\underset{\left(0.05\right)}{{0.2195}^{{{}^{\ast }}^{\ast }{}^{\ast }}}$ −0.4 $\underset{\left(0.0567\right)}{-0.0051}$ y2 − 1 0.1 $\underset{\left(0.0513\right)}{{0.1267}^{{{}^{\ast }}^{\ast }}}$ 0.4 $\underset{\left(0.061\right)}{{0.4926}^{***}}$ Gender = Male −0.05 $\underset{\left(0.0521\right)}{-0.0554}$ 0.05 $\underset{\left(0.0594\right)}{0.073}$ Medical density − − 0.5 $\underset{\left(1.1111\right)}{0.5687}$ Unemployment rate −0.2 $\underset{\left(0.269\right)}{-{0.1682}^{***}}$ − − Intercept 1.9 $\underset{\left(0.2667\right)}{{2.3113}^{***}}$ −0.4 $\underset{\left(2.122\right)}{-0.4677}$ Initial Conditions Illness before prof: life 0.3 $\underset{\left(0.0283\right)}{{0.3032}^{***}}$ −0.2 $\underset{\left(0.0221\right)}{-{0.1624}^{***}}$ Age − − −0.08 $\underset{\left(0.0202\right)}{-{0.093}^{***}}$ Unemployment rate −0.2 $\underset{\left(0.057\right)}{-{0.144}^{{{}^{\ast }}^{\ast }}}$ − − Intercept −0.2 $\underset{\left(0.6194\right)}{-0.7331}$ 2 $\underset{\left(0.4591\right)}{{2.6757}^{***}}$ ${\lambda }_{1}$ 0.4 $\underset{\left(0.0651\right)}{{0.2581}^{***}}$ 0.3 $\underset{\left(0.0463\right)}{{0.2660}^{***}}$ ${\lambda }_{2}$ −0.5 $\underset{\left(0.0753\right)}{-{0.5168}^{***}}$ 0.5 $\underset{\left(0.0598\right)}{{0.7022}^{***}}$ Covariance matrix structure DGP Estimated coef. (4) (5) ${\sigma }_{1}$ 2.1 $\underset{\left(0.1034\right)}{{2.4399}^{***}}$ ${\sigma }_{2}$ 3.1 $\underset{\left(0.1365\right)}{{2.7649}^{***}}$ ${\rho }_{\eta }$ 0.7 $\underset{\left(0.0212\right)}{{0.7188}^{***}}$ ${\rho }_{\zeta }$ 0.5 $\underset{\left(0.0419\right)}{{0.5290}^{***}}$ ${\rho }_{\epsilon }$ 0.4 $\underset{\left(0.1378\right)}{{0.6972}^{***}}$