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Wages and the demand for health - a life cycle analysis

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Author Info
Christian Dustmann () (Institute for Fiscal Studies and University College London)
Frank Windmeijer () (Institute for Fiscal Studies and University of Bristol)

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Abstract

This paper presents a life cycle model for the demand for health, and derives empirical specifications that distinguish between permanent and transitory wage responses. Using panel data, we estimate dynamic health and health input demand equations. We find evidence of negative transitory wage effects, and positive permanent effects. Estimation results based on our life cylce framework lead to very different conclusions than those based on static cross section analyses that are common in the literature. This analysis emphasises the importance to analyse health related behaviour in a dynamic life cycle context.

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Publisher Info
Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W99/20.

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Length: 44 pp.
Date of creation: Jun 2000
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Handle: RePEc:ifs:ifsewp:99/20

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
I12 - Health, Education, and Welfare - - Health - - - Health Production

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. Grossman, Michael, 1998. "On optimal length of life," Journal of Health Economics, Elsevier, vol. 17(4), pages 499-509, August. [Downloadable!] (restricted)
  3. Cropper, M L, 1981. "Measuring the Benefits from Reduced Morbidity," American Economic Review, American Economic Association, vol. 71(2), pages 235-40, May. [Downloadable!] (restricted)
  4. Liljas, Bengt, 1998. "The demand for health with uncertainty and insurance," Journal of Health Economics, Elsevier, vol. 17(2), pages 153-170, April. [Downloadable!] (restricted)
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  6. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May. [Downloadable!] (restricted)
  7. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr. [Downloadable!] (restricted)
  8. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
  9. Picone, Gabriel & Uribe, Martin & Mark Wilson, R., 1998. "The effect of uncertainty on the demand for medical care, health capital and wealth," Journal of Health Economics, Elsevier, vol. 17(2), pages 171-185, April. [Downloadable!] (restricted)
  10. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 47-74, January. [Downloadable!] (restricted)
  11. Eisenring, Christoph, 1999. "Comparative dynamics in a health investment model," Journal of Health Economics, Elsevier, vol. 18(5), pages 653-658, October. [Downloadable!] (restricted)
  12. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  13. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
  14. repec:cup:etheor:v:13:y:1997:i:5:p:667-78 is not listed on IDEAS
  15. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August. [Downloadable!] (restricted)
  16. Geil, Peter, et al, 1997. "Economic Incentives and Hospitalization in Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 295-311, May-June. [Downloadable!]
  17. Million, Andreas & Rotte, Ralph & Zimmermann, Klaus F, 1996. "Economic Incentives and Hospitalization in Germany," CEPR Discussion Papers 1516, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  18. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August. [Downloadable!] (restricted)
  19. Blundell, Richard & Griffith, Rachel & Windmeijer, Frank, 2002. "Individual effects and dynamics in count data models," Journal of Econometrics, Elsevier, vol. 108(1), pages 113-131, May. [Downloadable!] (restricted)
    Other versions:
  20. Chung, Ching-Fan & Goldberger, Arthur S, 1984. "Proportional Projections in Limited Dependent Variable Models," Econometrica, Econometric Society, vol. 52(2), pages 531-34, March. [Downloadable!] (restricted)
  21. Dardanoni, Valentino & Wagstaff, Adam, 1990. "Uncertainty and the demand for medical care," Journal of Health Economics, Elsevier, vol. 9(1), pages 23-38, June. [Downloadable!] (restricted)
    Other versions:
  22. Wooldridge, Jeffrey M., 1997. "Multiplicative Panel Data Models Without the Strict Exogeneity Assumption," Econometric Theory, Cambridge University Press, vol. 13(05), pages 667-678, October. [Downloadable!]
  23. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christopher J. Ruhm, 2004. "Macroeconomic Conditions, Health and Mortality," NBER Working Papers 11007, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Ana Llena-Nozal & Maarten Lindeboom & France Portrait, 2005. "The effect of work on mental health: Does occupation Matter?," Labor and Demography 0501011, EconWPA. [Downloadable!]
    Other versions:
  3. Gabriel A. Picone & Frank Sloan & Justin G. Trogdon, 2004. "The effect of the tobacco settlement and smoking bans on alcohol consumption," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 1063-1080. [Downloadable!]
  4. Laura Blow & Andrew Leicester & Frank Windmeijer, 2005. "Parental income and children's smoking behaviour: evidence from the British Household Panel Survey," IFS Working Papers W05/10, Institute for Fiscal Studies. [Downloadable!]
  5. Zhong Zhao, 2005. "Health Determinants in Urban China," IZA Discussion Papers 1835, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Zhong Zhao, 2005. "Analysis of Health and Longevity in Oldest-Old Population: A Health Capital Approach," IZA Discussion Papers 1877, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Andersson, Fredrik & A. Konrad, Kai, 2001. "Globalization and Human Capital Formation," IZA Discussion Papers 245, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Christopher J. Ruhm, 2006. "A Healthy Economy Can Break Your Heart," NBER Working Papers 12102, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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