Wealth and Health Behavior

Testing the Concept of a Health Cost

Published in: European Economic Review, v. 72, Nov. 2014, P. 197–220

Posted on RAND.org on January 09, 2015

by Hans van Kippersluis, Titus Galama

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Wealthier individuals engage in healthier behavior. This paper seeks to explain this phenomenon by exploiting both inheritances and lottery winnings to test a theory of health behavior. We distinguish between the direct monetary cost and the indirect health cost (value of health lost) of unhealthy consumption. The health cost increases with wealth and the degree of unhealthiness, leading wealthier individuals to consume more healthy and moderately unhealthy, but fewer severely unhealthy goods. The empirical evidence presented suggests that differences in health costs may indeed partially explain behavioral differences, and ultimately health outcomes, between wealth groups.

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