Exploring the Health-Wealth Nexus
Douglas L. Miller
January 2003
Abstract
The casual links between health and economic resources have long concerned
social scientists. We use four waves of data from the Panel Study of Income Dynamics
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, the quantitative
effect is small. We conclude that the wealth-health connection is not driven by
short run changes in wealth.
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