IDEAS home Printed from
MyIDEAS: Login to save this paper

A Life Cycle Approach to the Mechanism Connecting Health Inequality and Earnings Inequality

  • Maria Prados

    (Columbia University)

Understanding the sources of earnings inequality and the consequences of earnings risk is important for policy. This paper incorporates the health aspect to this problem and studies its implications for the US economy, which has not so far been done in the strand of the macroeconomics literature that studies and measures sources of inequality and earnings risk. The premise is that earnings and health are closely intertwined for any individual through an economic mechanism. On the one hand, health care is important from the worker's perspective not only because of the value he assigns to his own health and longevity, but also because of the direct effects that health has over the potential productivity of each individual. On the other hand, health care is a private good, so those with higher earnings can afford more health care if desired, than those with lower earnings. The main result of taking into account the health dimension is that income disparities give rise to health disparities, and at the same time, health outcomes shape potential earnings. I build a macroeconomic framework that incorporates these characteristics of health care into a model where workers face risky labor earnings as well as shocks to health, and calibrate it to match moments from US data. This framework will provide insight about the relevance of health as determinant of lifetime earnings risk and persistence of earnings shocks and allow to analyze the effects that different configurations of the health care sector may have on the idiosyncratic productivity risk that workers face through their lifetimes.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1145.

in new window

Date of creation: 2012
Date of revision:
Handle: RePEc:red:sed012:1145
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed012:1145. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.