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Health, wealth, and informality over the life cycle

Author

Listed:
  • Julien Albertini

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - UJM EPE - Université Jean Monnet (EPSCPE) - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique)

  • Xavier Fairise

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

  • Anthony Terriau

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

Abstract

What is the impact of bad health on labor market trajectories, consumption, and wealth accumulation in a developing country characterized by a large informal sector and strong inequalities? We develop and estimate a heterogeneous agents model with two sectors to quantify the impact of health shocks and to disentangle the channels through which they affect wealth and consumption over the life cycle in South Africa. We show that the effects of health shocks are significant and strongly depend on the job status of individuals. For formal workers, bad health reduces labor efficiency, which translates into lower earnings. For informal workers and the non-employed, the shock lowers the job finding rate and increases job separation into non-employment, which results in a surge in non-employment spells. As the non-employed are more likely to be unhealthy, health shocks generate a vicious circle.

Suggested Citation

  • Julien Albertini & Xavier Fairise & Anthony Terriau, 2021. "Health, wealth, and informality over the life cycle," Post-Print halshs-04204687, HAL.
    • Handle: RePEc:hal:journl:halshs-04204687
    DOI: 10.1016/j.jedc.2021.104170
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    Cited by:

    1. is not listed on IDEAS
    2. Julien Albertini & Xavier Fairise & Arthur Poirier & Anthony Terriau, 2022. "Short-Time Work Policies During the Covid-19 Pandemic," Annals of Economics and Statistics, GENES, issue 146, pages 123-172.
    3. Justin van de Ven & Patryk Bronka & Matteo Richiardi, 2025. "Dynamic Simulation of Taxes and Welfare Benefits by Database Imputation," International Journal of Microsimulation, International Microsimulation Association, vol. 18(2), pages 124-155.

    More about this item

    Keywords

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    JEL classification:

    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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