Exploring the health–wealth nexus

• Published in: Journal of health economics Vol. 22; no. 5; pp. 713 - 730
• Main Authors: Meer, Jonathan, Miller, Douglas L, Rosen, Harvey S
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier B.V 01.09.2003; Elsevier; Elsevier Sequoia S.A
• Series: Journal of Health Economics
• Subjects: Access to health care; Causality; Economic resources; Economics; Family Characteristics; Geography; Health; Health administration; Health inequality; Health Status Indicators; Humans; Income; Income - classification; Income - statistics & numerical data; Inheritances; Instrumental variable estimation; Models, Econometric; Panel Study of Income Dynamics (PSID); Poverty; Regression analysis; Self Concept; Social Change; Socioeconomic factors; Socioeconomic status; Studies; Time Factors; United States; Wealth; Wills - economics; United States; United States > US; I1; Health; Panel Study of Income Dynamics (PSID); Wealth
• ISSN: 0167-6296; 1879-1646
• DOI: 10.1016/S0167-6296(03)00059-6

The causal links between health and economic resources have long concerned social scientists. We use four waves of data from the Panel Study of Income Dynamics (PSID) to analyze the impact of wealth upon an individual’s health status. The difficulty in approaching this task that has bedeviled previous studies is that wealth may be endogenous; a priori, it is just as likely that changes in health affect wealth as vice versa. We argue that inheritance is a suitable instrument for the change in wealth, and implement a straightforward instrumental variables strategy to deal with this problem. Our results suggest that the causal relationship running from wealth to health may not be as strong as first appears. In the data, wealth exerts a positive and statistically significant effect on health status, but it is very small in magnitude. Instrumental variables estimation leaves the point estimate approximately the same, but renders it insignificantly different from zero. And even when the point estimate is increased by twice its standard error (S.E.), the quantitative effect is small. We conclude that the wealth-health connection is not driven by short run changes in wealth.