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The Impact of Income Shocks on Health: Evidence from Cohort Data

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  • Adda, Jérôme

    (Bocconi University)

  • Banks, James

    (Institute for Fiscal Studies, London)

  • Gaudecker, Hans-Martin von

    (University of Bonn)

Abstract

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 a wide range of health measures, but do lead to increases in mortality and risky health behaviour.

Suggested Citation

  • Adda, Jérôme & Banks, James & Gaudecker, Hans-Martin von, 2008. "The Impact of Income Shocks on Health: Evidence from Cohort Data," IZA Discussion Papers 3329, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3329
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    References listed on IDEAS

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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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    More about this item

    Keywords

    income shocks; health;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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