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 Jan 9, 2015
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.