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The Rich Live Longer: A Model of Income and Health Inequalities

Author

Listed:
  • Pablo Garcia-Sanchez

    (Banque centrale du Luxembourg, Departement Economie et Recherche)

  • Olivier Pierrard

    (Banque centrale du Luxembourg, Departement Economie et Recherche)

Abstract

Income and life expectancy are strongly correlated, yet the mechanisms underlying this relationship remain debated. This paper develops a structural model in which both variables are endogenous and jointly determined. Calibrated to U.S. data, the model replicates the income-longevity gradient and the distribution of age at death. It highlights the importance of both the health-to-income and income-to-health channels in accounting for these empirical patterns. Our model also offers a more cautious assessment of income redistribution policies than empirical studies, showing that redistribution can weaken incentives for preventive care and increase mortality risk. By contrast, lowering the price of preventive care through subsidies promotes better health and longer lives.

Suggested Citation

  • Pablo Garcia-Sanchez & Olivier Pierrard, 2025. "The Rich Live Longer: A Model of Income and Health Inequalities," LIDAM Discussion Papers IRES 2025016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2025016
    as

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    File URL: https://sites.uclouvain.be/econ/DP/IRES/2025016.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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