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

  • Adda, Jérôme

    ()

    (Bocconi University)

  • Banks, James

    ()

    (Institute for Fiscal Studies, London)

  • Gaudecker, Hans-Martin von

    ()

    (University of Bonn)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3329.

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Length: 35 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2009, 7 (6), 1361 - 1399
Handle: RePEc:iza:izadps:dp3329
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  1. Ruhm, Christopher J., 2003. "Good times make you sick," Journal of Health Economics, Elsevier, vol. 22(4), pages 637-658, July.
  2. Christopher J. Ruhm, 2003. "Healthy Living in Hard Times," NBER Working Papers 9468, National Bureau of Economic Research, Inc.
  3. 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.
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