IDEAS home Printed from https://ideas.repec.org/p/duh/wpaper/1506.html
   My bibliography  Save this paper

Individual Investments in Education and Health

Author

Listed:
  • Snorre Kverndokk

    (Ragnar Frisch Centre for Economic Research)

  • Jared C. Carbone

    (Colorado School of Mines)

Abstract

Empirical studies show that years of schooling are positively correlated with good health, and that education is better correlated with health than with variables like occupation and income. This can be explained in different ways as the implication may go from education to health, from health to education, and there may be variables that influence health and education in the same direction. The effect of different policy instruments to reduce the social gradient in health will depend on the strength of these causalities. In this paper we formalize a model that simultaneously determines an individual’s demand for knowledge and health based on the mentioned causal effects. We study the impacts on both health and education of different policy instruments such as subsidies on medical care, subsidizing schooling, income tax reduction, lump sum transfers and improving health at young age. Our results indicate that income transfers such as distributional policies may be the best instrument to improve welfare, while subsidies to medical care is the best instrument for longevity. However, subsidies to medical care or education would require large imperfections in the markets for health and education to be more welfare improving than distributional policies. Finally, our simulations suggest that underlying factors that impact both health and education is the main explanation for the correlation shown empirically.

Suggested Citation

  • Snorre Kverndokk & Jared C. Carbone, 2015. "Individual Investments in Education and Health," CINCH Working Paper Series 1506, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Jun 2015.
  • Handle: RePEc:duh:wpaper:1506
    as

    Download full text from publisher

    File URL: https://cinch.uni-due.de/fileadmin/content/research/workingpaper/1506_CINCH-Series_kverndokk.pdf
    File Function: First version, 2015
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Benedicte Apouey & Andrew E. Clark, 2015. "Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 516-538, May.
    2. Halliday, Timothy J. & He, Hui & Ning, Lei & Zhang, Hao, 2019. "Health Investment Over The Life-Cycle," Macroeconomic Dynamics, Cambridge University Press, vol. 23(1), pages 178-215, January.
    3. Altindag, Duha & Cannonier, Colin & Mocan, Naci, 2011. "The impact of education on health knowledge," Economics of Education Review, Elsevier, vol. 30(5), pages 792-812, October.
    4. de Walque, Damien, 2004. "Education, information, and smoking decisions : evidence from smoking histories, 1940-2000," Policy Research Working Paper Series 3362, The World Bank.
    5. Chapman, Kenneth S & Hariharan, Govind, 1996. "Do Poor People Have a Stronger Relationship between Income and Mortality Than the Rich? Implications of Panel Data for Health-Health Analysis," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 51-63, January.
    6. Giorgio Brunello & Margherita Fort & Nicole Schneeweis & Rudolf Winter‐Ebmer, 2016. "The Causal Effect of Education on Health: What is the Role of Health Behaviors?," Health Economics, John Wiley & Sons, Ltd., vol. 25(3), pages 314-336, March.
    7. Joshua J. Robinson, 2014. "Sound Body, Sound Mind?," CINCH Working Paper Series 1403, Universitaet Duisburg-Essen, Competent in Competition and Health.
    8. Anne Case & Christina Paxson, 2011. "The Long Reach of Childhood Health and Circumstance: Evidence from the Whitehall II Study," Economic Journal, Royal Economic Society, vol. 121(554), pages 183-204, August.
    9. repec:pri:cheawb:case_paxson_economic_status_paper is not listed on IDEAS
    10. Meghir, Costas & Palme, Mårten & Simeonova, Emilia, 2012. "Education, Health and Mortality: Evidence from a Social Experiment," IZA Discussion Papers 6462, Institute of Labor Economics (IZA).
    11. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    12. Petter Lundborg, 2013. "The health returns to schooling—what can we learn from twins?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 673-701, April.
    13. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    14. Ainhoa Aparicio & Libertad González Luna, 2013. "Newborn health and the business cycle: Is it good to be born in bad times?," Economics Working Papers 1374, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2014.
    15. Jon Gjerde & Sverre Grepperud & Snorre Kverndokk, 2005. "On adaptation and the demand for health," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1283-1301.
    16. Hendrik Jürges & Eberhard Kruk & Steffen Reinhold, 2013. "The effect of compulsory schooling on health—evidence from biomarkers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 645-672, April.
    17. Paul Contoyannis & Andrew M. Jones & Nigel Rice, 2004. "The dynamics of health in the British Household Panel Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 473-503.
    18. Rucker C. Johnson, 2011. "Long-run Impacts of School Desegregation & School Quality on Adult Attainments," NBER Working Papers 16664, National Bureau of Economic Research, Inc.
    19. Titus J. Galama & Hans van Kippersluis, 2015. "A Theory of Education and Health," CINCH Working Paper Series 1503, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Mar 2015.
    20. Marjon van der Pol, 2011. "Health, education and time preference," Health Economics, John Wiley & Sons, Ltd., vol. 20(8), pages 917-929, August.
    21. James P. Smith, 2007. "The Impact of Socioeconomic Status on Health over the Life-Course," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
    22. Joan Costa-Font & Martin Karlsson & Henning Øien, 2015. "Informal Care and the Great Recession," CINCH Working Paper Series 1502, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Feb 2015.
    23. 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 223-255, March-Apr.
    24. Titus J. Galama & Hans van Kippersluis, 2015. "A Theory of Education and Health," CINCH Working Paper Series 1503, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Mar 2015.
    25. Sherry Glied & Adriana Lleras-Muney, 2008. "Technological innovation and inequality in health," Demography, Springer;Population Association of America (PAA), vol. 45(3), pages 741-761, August.
    26. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, September.
    27. Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," NBER Chapters, in: Perspectives on the Economics of Aging, pages 415-526, National Bureau of Economic Research, Inc.
    28. Avdic, Danie, 2015. "A matter of life and death? Hospital distance and quality of care: evidence from emergency hospital closures and myocardial infarctions," Working Paper Series 2015:1, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    29. Case, Anne & Fertig, Angela & Paxson, Christina, 2005. "The lasting impact of childhood health and circumstance," Journal of Health Economics, Elsevier, vol. 24(2), pages 365-389, March.
    30. Dahmann, Sarah C., 2017. "How does education improve cognitive skills? Instructional time versus timing of instruction," Labour Economics, Elsevier, vol. 47(C), pages 35-47.
    31. de Walque, Damien, 2007. "How does the impact of an HIV/AIDS information campaign vary with educational attainment? Evidence from rural Uganda," Journal of Development Economics, Elsevier, vol. 84(2), pages 686-714, November.
    32. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
    33. Muurinen, Jaana-Marja, 1982. "Demand for health: A generalised Grossman model," Journal of Health Economics, Elsevier, vol. 1(1), pages 5-28, May.
    34. Mikael Lindahl, 2005. "Estimating the Effect of Income on Health and Mortality Using Lottery Prizes as an Exogenous Source of Variation in Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    35. Douglas Almond & Kenneth Y. Chay & David S. Lee, 2005. "The Costs of Low Birth Weight," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 1031-1083.
    36. repec:pri:rpdevs:case_and_paxson_whitehall_jan_2011 is not listed on IDEAS
    37. M. Christopher Auld & Nirmal Sidhu, 2005. "Schooling, cognitive ability and health," Health Economics, John Wiley & Sons, Ltd., vol. 14(10), pages 1019-1034, October.
    38. Michael, Robert T, 1973. "Education in Nonmarket Production," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 306-327, Part I, M.
    39. Ciro Avitabile & Tullio Jappelli & Mario Padula, 2008. "Screening Tests, Information, and the Health-Education Gradient," CSEF Working Papers 187, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 28 Apr 2008.
    40. Ngina Chiteji, 2010. "Time Preference, Noncognitive Skills and Well Being across the Life Course: Do Noncognitive Skills Encourage Healthy Behavior?," American Economic Review, American Economic Association, vol. 100(2), pages 200-204, May.
    41. Anne Case & Darren Lubotsky & Christina Paxson, 2002. "Economic Status and Health in Childhood: The Origins of the Gradient," American Economic Review, American Economic Association, vol. 92(5), pages 1308-1334, December.
    42. Cutler, David M. & Lleras-Muney, Adriana, 2010. "Understanding differences in health behaviors by education," Journal of Health Economics, Elsevier, vol. 29(1), pages 1-28, January.
    43. Resul Cesur & Inas Rashad, 2008. "High Birth Weight and Cognitive Outcomes," NBER Working Papers 14524, National Bureau of Economic Research, Inc.
    44. Benedicte Apouey & Andrew E. Clark, 2015. "Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 516-538, May.
    45. Anna Aizer & Laura Stroud, 2010. "Education, Knowledge and the Evolution of Disparities in Health," NBER Working Papers 15840, National Bureau of Economic Research, Inc.
    46. Jan Goebel & Christian Krekel & Tim Tiefenbach & Nicholas R. Ziebarth, 2014. "Natural Disaster, Environmental Concerns, Well-Being and Policy Action," CINCH Working Paper Series 1405, Universitaet Duisburg-Essen, Competent in Competition and Health.
    47. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
    48. Benedicte Apouey & Andrew E. Clark, 2015. "Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 516-538, May.
    49. Jere R. Behrman & Mark R. Rosenzweig, 2004. "Returns to Birthweight," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 586-601, May.
    50. Michael Grossman, 2006. "Household Production and Health," Springer Books, in: Shoshana Grossbard (ed.), Jacob Mincer A Pioneer of Modern Labor Economics, chapter 13, pages 161-172, Springer.
    51. John Karl Scholz & Ananth Seshadri, 2010. "Health and Wealth in a Life Cycle Model," Working Papers wp224, University of Michigan, Michigan Retirement Research Center.
    52. repec:pri:cheawb:case_and_paxson_whitehall_jan_2011 is not listed on IDEAS
    53. Frijters, Paul & Haisken-DeNew, John P. & Shields, Michael A., 2005. "The causal effect of income on health: Evidence from German reunification," Journal of Health Economics, Elsevier, vol. 24(5), pages 997-1017, September.
    54. de Walque, Damien, 2007. "Does education affect smoking behaviors?: Evidence using the Vietnam draft as an instrument for college education," Journal of Health Economics, Elsevier, vol. 26(5), pages 877-895, September.
    55. Carbone, Jared C. & Kverndokk, Snorre & Rogeberg, Ole Jorgen, 2005. "Smoking, health, risk, and perception," Journal of Health Economics, Elsevier, vol. 24(4), pages 631-653, July.
    56. Ryan D. Edwards, 2010. "Health, Income, and the Timing of Education Among Military Retirees," NBER Working Papers 15778, National Bureau of Economic Research, Inc.
    57. Fletcher Jason M. & Lehrer Steven F, 2009. "The Effects of Adolescent Health on Educational Outcomes: Causal Evidence Using Genetic Lotteries between Siblings," Forum for Health Economics & Policy, De Gruyter, vol. 12(2), pages 1-33, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kronenberg, Christoph, 2020. "New(spaper) Evidence of a Reduction in Suicide Mentions during the 19th‐century US Gold Rush," CINCH Working Paper Series (since 2020) 73382, Duisburg-Essen University Library, DuEPublico.
    2. Bolin, Kristian & Lindgren, Björn, 2016. "Non-monotonic health behaviours – implications for individual health-related behaviour in a demand-for-health framework," Journal of Health Economics, Elsevier, vol. 50(C), pages 9-26.
    3. Clarke, Damian & Mühlrad, Hanna, 2016. "The Impact of Abortion Legalization on Fertility and Maternal Mortality: New Evidence from Mexico," Working Papers in Economics 661, University of Gothenburg, Department of Economics.
    4. Elizabeth Lemmon, 2018. "Utilisation of personal care services in Scotland: the influence of unpaid carers," CINCH Working Paper Series 1802, Universitaet Duisburg-Essen, Competent in Competition and Health.
    5. Katerina Koka & Audrey Laporte & Brian Ferguson, 2014. "Theoretical Simulation in Health Economics: An application to Grossman's Model of Investment in Health Capital," Working Papers 140010, Canadian Centre for Health Economics.
    6. Fischer, Martin & Karlsson, Martin & Prodromidis, Nikolaos, 2021. "Long‐term Effects of Hospital Deliveries," CINCH Working Paper Series (since 2020) 74712, Duisburg-Essen University Library, DuEPublico.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jared C. Carbone & Snorre Kverndokk, 2017. "Individual Investments in Education and Health: Policy Responses and Interactions," Advances in Health Economics and Health Services Research, in: Kristian Bolin & Björn Lindgren & Michael Grossman & Dorte Gyrd-Hansen & Tor Iversen & Robert Kaestn (ed.), Human Capital and Health Behavior, volume 25, pages 33-83, Emerald Publishing Ltd.
    2. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers 13-170/V, Tinbergen Institute.
    3. Roman Hoffmann & Sebastian Uljas Lutz, 2019. "The health knowledge mechanism: evidence on the link between education and health lifestyle in the Philippines," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(1), pages 27-43, February.
    4. Titus J. Galama & Adriana Lleras-Muney & Hans van Kippersluis, 2018. "The Effect of Education on Health and Mortality: A Review of Experimental and Quasi-Experimental Evidence," NBER Working Papers 24225, National Bureau of Economic Research, Inc.
    5. Oscar Erixson, 2017. "Health responses to a wealth shock: evidence from a Swedish tax reform," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(4), pages 1281-1336, October.
    6. Eide, Eric R. & Showalter, Mark H., 2011. "Estimating the relation between health and education: What do we know and what do we need to know?," Economics of Education Review, Elsevier, vol. 30(5), pages 778-791, October.
    7. Otto Lenhart, 2019. "The effects of income on health: new evidence from the Earned Income Tax Credit," Review of Economics of the Household, Springer, vol. 17(2), pages 377-410, June.
    8. Beomsoo Kim & Christopher J. Ruhm, 2012. "Inheritances, health and death," Health Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 127-144, February.
    9. Eriksson, Tor & Bratsberg, Bernt & Raaum, Oddbjørn, 2005. "Earnings persistence across generations: Transmission through health?," Memorandum 35/2005, Oslo University, Department of Economics.
    10. Strulik, Holger, 2018. "The return to education in terms of wealth and health," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 1-14.
    11. Chen, Xi & Wang, Tianyu & Busch, Susan H., 2019. "Does money relieve depression? Evidence from social pension expansions in China," Social Science & Medicine, Elsevier, vol. 220(C), pages 411-420.
    12. Damian Clarke & Hanna Muehlrad, 2016. "The Impact of Abortion Legalization on Fertility and Maternal Mortality: New Evidence from Mexico," CINCH Working Paper Series 1602, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Feb 2016.
    13. Ma, Yuanyuan & Nolan, Anne & Smith, James P., 2018. "The value of education to health: Evidence from Ireland," Economics & Human Biology, Elsevier, vol. 31(C), pages 14-25.
    14. Maria Klonowska-Matynia & Radosław Sobko, 2021. "Spatial Analysis of the Relationship between Health Capital and the Level of Health Care Expenditure in Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 133-151.
    15. John Gathergood & Eleonora Fichera, 2012. "House Prices, Home Equity and Health," Discussion Papers 12/07, University of Nottingham, School of Economics.
    16. Maite Blázquez Cuesta & Santiago Budría, 2013. "Does income deprivation affect people’s mental well-being?," Working Papers 1312, Banco de España.
    17. Strulik, Holger, 2011. "Health and Education: Understanding the Gradient," Hannover Economic Papers (HEP) dp-487, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    18. Titus J. Galama & Hans van Kippersluis, 2013. "Health Inequalities through the Lens of Health Capital Theory: Issues, Solutions, and Future Directions," Tinbergen Institute Discussion Papers 13-076/V, Tinbergen Institute.
    19. Eleonora Fichera & John Gathergood, 2016. "Do Wealth Shocks Affect Health? New Evidence from the Housing Boom," Health Economics, John Wiley & Sons, Ltd., vol. 25(S2), pages 57-69, November.
    20. Yu Aoki & Lualhati Santiago, 2015. "Fertility, Health and Education of UK Immigrants: The Role of English Language Skills," CINCH Working Paper Series 1510, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Aug 2015.

    More about this item

    Keywords

    Demand for health; Demand for education; Human capital; Numerical modeling; Causality;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:duh:wpaper:1506. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cinchde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Benjamin Karas (email available below). General contact details of provider: https://edirc.repec.org/data/cinchde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.