Three essays on the health and wealth of nations

Date

2008-06-09T16:55:42Z

Authors

Chen, Weichun

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Abstract

This dissertation both theoretically and empirically examines the relationship between health and wealth, using proxies for health and wealth that are standard in the economics literature. We first model the endogenous interactions between life expectancy and income by modifying a standard overlapping generation model to allow individuals to directly choose their own longevity. The model displays a positive feedback between life expectancy and income that generates multiple stable equilibria. The worse equilibrium is a “poverty-trap” in which poverty and low longevity reinforce each other. The second portion of the dissertation is empirical. We first show that income has statistically significant effects on various proxies for health. The results are robust to different ways of controlling for the endogeneity of income: both instrumental variable estimation with external instruments and also generalized method of moments estimation when internal instruments are applied. We next directly test for the causal relationship between income and various proxies for health using three panel Granger causality tests. Evidence is found to support the existence of a bi-directional causal link. Sensitivity tests further suggest that middle-income countries play a more important role than low-income countries in explaining the overall wealth-health causality.

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Keywords

health, wealth, OLG, panel causality, internal instrumental variable

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