Healthy Bodies and Thick Wallets

The Dual Relation Between Health and Economic Status

by James P. Smith

There is abundant evidence of a quantitatively large association between measures of economic status and health outcomes, such as mortality or morbidity. However, considerable debate remains about the direction of causation and about why the association arises. Medical scientists are convinced that the dominant pathway is that variation in socioeconomic status produces health disparities, and they are increasingly debating among themselves about why low economic status leads to poor health. Economists are now exploring the impact that poor health has on economic resources. This work cautions against exaggerating the magnitude of one-direction causation from economic status to health outcomes. The first section of this paper documents the size of association between health and household wealth. The next section examines why health may alter household savings and wealth, and estimates the empirical magnitude of these effects. The third section summarizes major controversies and evidence surrounding the links between economic status and health.

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Originally published in: Journal of Economic Perspectives, v. 13, no. 2, Spring 1999, pp. 192-196.

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