Working Paper: CEPR ID: DP14796
Authors: Panagiotis Margaris; Johanna Wallenius
Abstract: In this paper we develop and estimate a life cycle model that features pecuniary and non-pecuniary investments in health, along with a cognitive ability gradient associated with said investments, in order to rationalize the socioeconomic gradients in health and life expectancy in the United States. Agents accumulate health capital, which affects the level of utility, labor productivity, the distribution of medical spending shocks and life expectancy. We find that the cognitive ability gradient to health investments and the differences in lifetime income account for the lion’s share of the observed life expectancy gap. Providing universal health insurance coverage has heterogeneous effects, depending on the progressivity of the financing mechanism, and at best results in a modest decrease in the life expectancy gap.
Keywords: inequality; health; time use; life cycle
JEL Codes: I14; E21; D31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Educational attainment (I21) | Health investments (H51) |
| Health investments (H51) | Health outcomes (I14) |
| Health outcomes (I14) | Life expectancy (J17) |
| Cognitive ability gradient (D91) | Effectiveness of health investments (I15) |
| Lifetime income differences (J31) | Life expectancy gap (J17) |
| Educational attainment (I21) | Life expectancy (J17) |
| Cognitive ability gradient (D91) | Life expectancy gap (J17) |
| Eliminating effectiveness gradient of health investments (I14) | Life expectancy gap (J17) |
| Addressing income disparities (I24) | Life expectancy gap (J17) |
| Reducing unequal access to health insurance (I14) | Life expectancy gap (J17) |