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

  • Jérome Adda
  • James Banks
  • Hans-Martin von Gaudecker

    (Munich Center for the Economics of Aging (MEA))

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 Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 07146.

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Date of creation: 13 Aug 2007
Date of revision:
Handle: RePEc:mea:meawpa:07146
Contact details of provider: Postal: Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 München, Germany
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  1. Angus Deaton & Christina Paxson, 1999. "Mortality, education, income and inequality among American cohorts," Working Papers 279, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
  2. Ruhm, Christopher J., 2003. "Healthy Living in Hard Times," IZA Discussion Papers 711, Institute for the Study of Labor (IZA).
  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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