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Income Risk and Health

  • Timothy J. Halliday

    ()

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

We investigate the impact of exogenous income shocks on health using twenty years of data from the Panel Study of Income Dynamics. To unravel the impact of income on health from unobserved heterogeneity and reverse causality, we employ techniques from the literature on the estimation of dynamic panel data models. Contrary to much of the previous literature on the gradient, we find that, on average, adverse income shocks lead to a deterioration of health. These effects are most pronounced for working-aged men and are dominated by transitions into the very bottom of the earnings distribution. We also provide suggestive evidence of an association between negative income shocks and higher mortality for working-aged men.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-10R.pdf
File Function: First version, 2007
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200710.

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Length: 33 pages
Date of creation: 30 Mar 2007
Date of revision:
Handle: RePEc:hai:wpaper:2007010
Note: Revised version of WP 06-12.
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  1. Michael Baker & Mark Stabile & Catherine Deri, 2004. "What Do Self-Reported, Objective, Measures of Health Measure?," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
  2. Carrasco, R., 1998. "Binary Choice with Binary Endogenous Regressors in Panel Data: Estimating the Effect of Fertility on Female Labour Participation," Papers 9805, Centro de Estudios Monetarios Y Financieros-.
  3. Gerdtham, Ulf-G. & Ruhm, Christopher J., 2006. "Deaths rise in good economic times: Evidence from the OECD," Economics & Human Biology, Elsevier, vol. 4(3), pages 298-316, December.
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  5. 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.
  6. Anne C. Case & Christina Paxson, 2004. "Sex Differences in Morbidity and Mortality," NBER Working Papers 10653, National Bureau of Economic Research, Inc.
  7. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  8. Arellano, Manuel & Carrasco, Raquel, 2003. "Binary choice panel data models with predetermined variables," Journal of Econometrics, Elsevier, vol. 115(1), pages 125-157, July.
  9. 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 223-55, March-Apr.
  10. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  11. Christopher J. Ruhm, 2003. "Healthy Living in Hard Times," NBER Working Papers 9468, National Bureau of Economic Research, Inc.
  12. Costas Meghir & Luigi Pistaferri, 2001. "Income variance dynamics and heterogenity," IFS Working Papers W01/07, Institute for Fiscal Studies.
  13. Theodore Joyce & Naci Mocan, 1993. "Unemployment and Infant Health: Time-Series Evidence from the State of Tennessee," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 185-203.
  14. Timothy Halliday, 2006. "The Impact of Aggregate and Idiosyncratic Income Shocks on Health Outcomes: Evidence from the PSID," Working Papers 200606, University of Hawaii at Manoa, Department of Economics.
  15. Jonathan Meer & Douglas L. Miller & Harvey S. Rosen, 2003. "Exploring the Health-Wealth Nexus," NBER Working Papers 9554, National Bureau of Economic Research, Inc.
  16. Timothy J Halliday, 2005. "Business Cycles, Migration and Health," Working Papers 200504, University of Hawaii at Manoa, Department of Economics.
  17. Victor R. Fuchs, 1980. "Time Preference and Health: An Exploratory Study," NBER Working Papers 0539, National Bureau of Economic Research, Inc.
  18. Anne Case & Angus S. Deaton, 2005. "Broken Down by Work and Sex: How Our Health Declines," NBER Chapters, in: Analyses in the Economics of Aging, pages 185-212 National Bureau of Economic Research, Inc.
  19. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  20. Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January.
  21. Wagstaff, Adam, 1985. "Time series analysis of the relationship between unemployment and mortality: A survey of econometric critiques and replications of Brenner's studies," Social Science & Medicine, Elsevier, vol. 21(9), pages 985-996, January.
  22. Adda, Jerome & Chandola, Tarani & Marmot, Michael, 2003. "Socio-economic status and health: causality and pathways," Journal of Econometrics, Elsevier, vol. 112(1), pages 57-63, January.
  23. Ruhm, Christopher J., 2003. "Good times make you sick," Journal of Health Economics, Elsevier, vol. 22(4), pages 637-658, July.
  24. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
  25. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  26. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  27. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  28. Forbes, John F. & McGregor, Alan, 1984. "Unemployment and mortality in post-war Scotland," Journal of Health Economics, Elsevier, vol. 3(3), pages 239-257, December.
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