How Important Is Health Inequality for Lifetime Earnings Inequality?
Abstract/Contents
- Abstract
- Using a dynamic panel approach, we provide empirical evidence that negative health shocks reduce earnings. The effect is primarily driven by the participation margin and is concentrated in less educated and poor health individuals. We build a dynamic, general equilibrium, lifecycle model that is consistent with these findings. In the model, individuals, whose health is risky and heterogeneous, choose to either work, or not work and apply for social security disability insurance (SSDI). Health impacts individuals' productivity, SSDI access, disutility from work, mortality, and medical expenses. Calibrating the model to the United States, we nd that health inequality is an important source of lifetime earnings inequality: nearly 29 percent of the variation in lifetime earnings at age 65 is due to the fact that Americans face risky and heterogeneous lifecycle health proles. A decomposition exercise reveals that the primary reason why individuals in the United States in poor health have low lifetime earnings is because they have a high probability of obtaining SSDI benefits. In other words, the SSDI program is an important contributor to lifetime earnings inequality. Despite this, we show that it is ex ante welfare improving and, if anything, should be expanded.
Description
| Type of resource | text |
|---|---|
| Date created | 2021 |
Creators/Contributors
| Author | Hosseini, Roozbeh |
|---|---|
| Author | Kopecky, Karen |
| Author | Zhao, Kai |
| Organizer of meeting | Auclert, Adrien |
| Organizer of meeting | Mitman, Kurt |
| Organizer of meeting | Tonetti, Christopher |
| Organizer of meeting | Wong, Arlene |
Subjects
| Subject | earnings |
|---|---|
| Subject | health |
| Subject | frailty |
| Subject | inequality |
| Subject | disability |
| Subject | dynamic panel estimation |
| Subject | life-cycle models |
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Hosseini, R., Kopecky, K., and Zhao, K. (2022). How Important Is Health Inequality for Lifetime Earnings Inequality?. Stanford Digital Repository. Available at https://purl.stanford.edu/hy161wg7428
Collection
SITE Conference 2021
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- siteworkshop@stanford.edu
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