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The impact of income shocks on health: evidence from cohort data

  • Jerome Adda


    (Institute for Fiscal Studies and Bocconi University)

  • James Banks


    (Institute for Fiscal Studies and University of Manchester)

  • Hans-Martin von Gaudecker

    (Institute for Fiscal Studies)

We study the effect of permanent income innovations on health for a prime-aged population. Using information on more than half a million individuals sampled over a twenty-five year period in three different cross-sectional surveys we aggregate data by date-of-birth cohort to construct a 'synthetic cohort' dataset with details of income, expenditure, socio-demographic factors, health outcomes and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effects on health, but do affect health behaviour and mortality.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W07/05.

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Length: 32 pp.
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:ifs:ifsewp:07/05
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  1. Angus S. Deaton & Christina Paxson, 2001. "Mortality, Education, Income, and Inequality among American Cohorts," NBER Chapters, in: Themes in the Economics of Aging, pages 129-170 National Bureau of Economic Research, Inc.
  2. Ruhm, Christopher J., 2005. "Healthy living in hard times," Journal of Health Economics, Elsevier, vol. 24(2), pages 341-363, March.
  3. Ruhm, Christopher J., 2003. "Good times make you sick," Journal of Health Economics, Elsevier, vol. 22(4), pages 637-658, July.
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