Macro Seminar

Speaker: Jesus Bueren (European University Institute)

Title: Healthy Habits and Inequality

Format: Hybrid

Abstract:There are three important features of inequality in health outcomes across individuals. First, inequality in health outcomes is large; second, it has an important socio-economic gradient; and third, much inequality remains beyond the observed socio-economic gradient. In this paper, we study the role of differences in lifestyle and healthy habits as drivers of these facts. We start by jointly estimating latent healthy habits types and health dynamics in the HRS and the PSID. We do so by exploiting data on health behavior (preventive tests, substance abuse, exercise) and health outcomes (survival and health status) through MCMC methods. We find the following results. First, health behavior is well represented by two lifestyles: protective and detrimental. Second, lifestyles generate large gradients in life expectancy: at age 50 there are 8 years of life-expectancy difference between protective and harmful types. Third, lifestyles are correlated with education, but also carry independent information: differences in lifestyles explain 1/3 of the education gradient in life expectancy. And fourth, individuals holding detrimental lifestyles tend to accumulate less wealth (even controlling by education). We next build a life cycle heterogeneous agents model with idiosyncratic labor market and health risks. In the model, education and lifestyles are jointly chosen early in life. We first use the model to uncover the sources of individual heterogeneity that lead to the patterns in the data. We next use it to understand the role of differences in healthy habits and lifestyles in accounting for the relationship between health and economic inequality.

Organiser: Sekyu

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