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Exploring the Health-Wealth Nexus

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Author Info
Jonathan Meer
Douglas L. Miller
Harvey S. Rosen

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Abstract

The casual links between health and economic resources have long concerned social scientists. We use four waves of data from the Panel Study of Income Dynamics to analyze the impact of wealth upon an individual's health status. The difficulty in approaching this task that has bedeviled previous studies is that wealth may be endogenous; a priori, it is just as likely that changes in health affect wealth as vice versa. We argue that inheritance is a suitable instrument for the change in wealth, and implement a straightforward instrumental variables strategy to deal with this problem. Our results suggest that the causal relationship running from wealth to health may not be as strong as first appears. In the data, wealth exerts a positive and statistically significant effect on health status, but it is very small in magnitude. Instrumental variables estimation leaves the point estimate approximately the same, but renders it insignificantly different from zero. And even when the point estimate is increased by twice its standard error, the quantitative effect is small. We conclude that the wealth-health connection is not driven by short run changes in wealth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9554.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberwo:9554

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I12 - Health, Education, and Welfare - - Health - - - Health Production

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  10. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
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  13. John Cawley, 2000. "Body Weight and Women's Labor Market Outcomes," NBER Working Papers 7841, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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