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The Impact of Income Shocks on Health: Evidence from Cohort Data

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  • Jérôme Adda
  • James Banks
  • Hans-Martin von Gaudecker

Abstract

We study the effect of permanent income innovations on health for a prime-aged population. Using information on more than half a million individuals sampled over a 25-year period in three different cross-sectional surveys we aggregate data by date-of-birth cohort to construct a "synthetic cohort" data set with details of income, expenditure, socio-demographic factors, health outcomes, and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the 1980s and 1990s to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effect on a wide range of health measures, but do lead to increases in mortality and risky health behaviour. (JEL: I10, D31) (c) 2009 by the European Economic Association.

Suggested Citation

  • Jérôme Adda & James Banks & Hans-Martin von Gaudecker, 2009. "The Impact of Income Shocks on Health: Evidence from Cohort Data," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1361-1399, December.
  • Handle: RePEc:tpr:jeurec:v:7:y:2009:i:6:p:1361-1399
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    References listed on IDEAS

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    1. Angus S. Deaton & Christina Paxson, 2001. "Mortality, Education, Income, and Inequality among American Cohorts," NBER Chapters, in: Themes in the Economics of Aging, pages 129-170, National Bureau of Economic Research, Inc.
    2. Ruhm, Christopher J., 2005. "Healthy living in hard times," Journal of Health Economics, Elsevier, vol. 24(2), pages 341-363, March.
    3. Ruhm, Christopher J., 2003. "Good times make you sick," Journal of Health Economics, Elsevier, vol. 22(4), pages 637-658, July.
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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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