Health dynamics shape life-cycle incomes

• Published in: Journal of health economics Vol. 75; p. 102398
• Main Author: Kotschy, Rainer
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier B.V 01.01.2021; Elsevier Sequoia S.A
• Subjects: Age; Analysis; Cardiovascular diseases; Econometric models; Econometrics; Education; Educational attainment; Health administration; Health economics; Income; Labor supply; Life expectancy; Mortality; Productivity; Quasi-experimental methods; Transformation; Productivity; Labor supply; Life expectancy; Education; Mortality; J31; O40; J11; I15; J24; Age
• ISSN: 0167-6296; 1879-1646
• DOI: 10.1016/j.jhealeco.2020.102398

•Major improvements in population health are shown to boost income per person.•Health effects vary across age cohorts and shape life-cycle incomes.•Health improvements impact incomes indirectly through education and labor supply.•Size of health effects differs across gender, occupation type, and education type. This paper empirically investigates the long-run effects of major health improvements on income growth in the United States. To isolate exogenous changes in health, the econometric model uses quasi-experimental variation in cardiovascular disease mortality across states over time. Based on data for the white population, the results show that there is a causal link between health and income per person, and they provide novel evidence that health dynamics shape life-cycle incomes. Life-cycle income profiles slope more strongly at the beginning and at the end of work life in 2000 than in 1960, indicating that age becomes a more prominent determinant of income dynamics over this period. The channels for this transformation include better health, higher educational attainment, and changing labor supply.