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Health and wealth of elderly couples: Causality tests using dynamic panel data models

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  • Michaud, Pierre-Carl
  • van Soest, Arthur

Abstract

A positive relationship between socio-economic status (SES) and health, the "health-wealth gradient", is repeatedly found in many industrialized countries. This study analyzes competing explanations for this gradient: causal effects from health to wealth (health causation) and causal effects from wealth to health (wealth or social causation). Using six biennial waves of couples aged 51-61 in 1992 from the US Health and Retirement Study, we test for causality in panel data models incorporating unobserved heterogeneity and a lag structure supported by specification tests. In contrast to tests relying on models with only first order lags or without unobserved heterogeneity, these tests provide no evidence of causal wealth health effects. On the other hand, we find strong evidence of causal effects from both spouses' health on household wealth. We also find an effect of the husband's health on the wife's mental health, but no other effects from one spouse's health to health of the other spouse.

Suggested Citation

  • Michaud, Pierre-Carl & van Soest, Arthur, 2008. "Health and wealth of elderly couples: Causality tests using dynamic panel data models," Journal of Health Economics, Elsevier, vol. 27(5), pages 1312-1325, September.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:5:p:1312-1325
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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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