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Health Dynamics Shape Life-Cycle Incomes

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  • Rainer Franz Kotschy

Abstract

This paper empirically investigates the long-run effects of major health improvements on income growth in the United States. To isolate exogenous changes in health, the econometric model uses quasi-experimental variation in cardiovascular disease mortality across states over time. The results show that there is a causal link between health and income per person, and they provide novel evidence that health dynamics shape life-cycle incomes. Compared to previous generations, life-cycle income profiles slope more strongly at the beginning and at the end of work life, such that age becomes a more prominent determinant of income dynamics. The channels for this transformation include better health, higher educational attainment, and changing labor supply.

Suggested Citation

  • Rainer Franz Kotschy, 2019. "Health Dynamics Shape Life-Cycle Incomes," CESifo Working Paper Series 7953, CESifo.
    • Handle: RePEc:ces:ceswps:_7953
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    Cited by:

    1. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2022. "Optimal demand for medical and long-term care," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    2. Kotschy, Rainer, 2022. "Health improvements impact income inequality," The Journal of the Economics of Ageing, Elsevier, vol. 22(C).
    3. Bloom, David E. & Canning, David & Kotschy, Rainer & Prettner, Klaus & Schünemann, Johannes, 2018. "Health and Economic Growth: Reconciling the Micro and Macro Evidence," IZA Discussion Papers 11940, Institute of Labor Economics (IZA).
    4. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    5. Swensen, Isaac D. & Urban, Carly, 2023. "Literature Review on the Effect of Physical and Mental Health on Financial Well-Being," IZA Policy Papers 198, Institute of Labor Economics (IZA).
    6. Scott, Andrew J., 2023. "The economics of longevity – An introduction," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    7. Marie Ishida & Teralynn Ludwick & Ajay Mahal, 2022. "Heart Disease and The Economic Contributions of Elderly Men and Women: Evidence from Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(4), pages 461-476, December.

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    More about this item

    Keywords

    age; mortality; life expectancy; productivity; education; labor supply;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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