Department of Economics

Does Wealth Cause Health?

Research by Alexis Holteen

The link between socioeconomic status and individual health has been well established in economic literature, but controversy on the direction of the relationship remains. I use panel data from the Panel Study of Income Dynamics to identify the effect of an individual’s wealth on health status. Wealth and health are potentially endogenous, which makes establishing the effect of wealth on health more difficult. I extend a previous study on the health wealth nexus to include more recent data and analyze the different impacts wealth may have on physical and mental health (Meer et al., 2003). I use inheritance as an instrumental variable for wealth in my two stage least squares probit regression. While the impact of a change in wealth on health may be extremely small, I find a positive and statistically significant relationship between wealth and health.