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Health dynamics shape life-cycle incomes

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  • Kotschy, Rainer

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. Based on data for the white population, 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. Life-cycle income profiles slope more strongly at the beginning and at the end of work life in 2000 than in 1960, indicating that age becomes a more prominent determinant of income dynamics over this period. The channels for this transformation include better health, higher educational attainment, and changing labor supply.

Suggested Citation

  • Kotschy, Rainer, 2021. "Health dynamics shape life-cycle incomes," Journal of Health Economics, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:jhecon:v:75:y:2021:i:c:s0167629620310444
    DOI: 10.1016/j.jhealeco.2020.102398
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    Cited by:

    1. Kotschy, Rainer, 2022. "Health improvements impact income inequality," The Journal of the Economics of Ageing, Elsevier, vol. 22(C).
    2. 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).
    3. Scott, Andrew J., 2023. "The economics of longevity – An introduction," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    4. 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).
    5. 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).
    6. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(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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