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Health, Human Capital, and Life Cycle Labor Supply

  • Charles Hokayem
  • James P. Ziliak

We use new PSID data on consumption and health, along with information on annual sick time, to estimate a structural labor supply model that incorporates a health capital stock with the traditional human capital learning-by-doing model. The estimates show strong evidence of learning by doing as well as strong persistence in health. However, the estimates reveal that time and money seem to have little effect on health consistent with "flat of the curve" medicine. We find strong evidence that consumption and leisure are direct substitutes in preferences, and consumption and leisure are each utility complements with good health.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 104 (2014)
Issue (Month): 5 (May)
Pages: 127-31

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Handle: RePEc:aea:aecrev:v:104:y:2014:i:5:p:127-31
Note: DOI: 10.1257/aer.104.5.127
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  1. Shaw, Kathryn L, 1989. "Life-Cycle Labor Supply with Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 431-56, May.
  2. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
  3. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
  4. Sickles, Robin C & Yazbeck, Abdo, 1998. "On the Dynamics of Demand for Leisure and the Production of Health," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 187-97, April.
  5. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
  6. 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.
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