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Heterogeneity, State Dependence and Health

Author

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  • Timothy J Halliday

    (Department of Economics, University of Hawaii at Manoa
    John A Burns School of Medicine)

Abstract

In this paper, we use longitudinal data on Self-Reported Health Status from the Panel Study of Income Dynamics to estimate a model of the evolution of health over the life-cycle. The model allows for two sources of persistence in health: unobserved heterogeneity, which models an individual’s (unobserved) ability to cope with health shocks, and state dependence, which models the extent to which the ability to cope with health shocks depends on health status. We allow for flexibility in both sources of persistence. Estimation indicates that heterogeneity is an important determinant of health suggesting that a person’s health today has important antecedents earlier on in life. We also find evidence of state dependence. However, its magnitude depends crucially on the individual’s age and unobserved heterogeneity. The relative contributions of heterogeneity and state dependence that we uncover have different implications for how health policy should be conducted.

Suggested Citation

  • Timothy J Halliday, 2005. "Heterogeneity, State Dependence and Health," Working Papers 200503, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200503
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    References listed on IDEAS

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    More about this item

    Keywords

    health; dynamic panel data models; gradient;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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