Why the Rich Drink More But Smoke Less: The Impact of Wealth on Health
Tinbergen Institute Discussion Paper 13-035/V
54 Pages Posted: 2 Mar 2013
Date Written: February 24, 2013
Abstract
Wealthier individuals engage in healthier behavior. This paper seeks to explain this phenomenon by developing a theory of health behavior, and exploiting both lottery winnings and inheritances to test the theory. We distinguish between the direct monetary cost and the indirect health cost (value of health lost) of unhealthy consumption. The health cost increases with wealth and the degree of unhealthiness, leading wealthier individuals to consume more healthy and moderately unhealthy, but fewer severely unhealthy goods. The empirical evidence presented suggests that differences in health costs may indeed provide an explanation for behavioral differences, and ultimately health outcomes, between wealth groups.
Keywords: consumption, health, health capital, health behavior, wealth
JEL Classification: D91, I10, I12, I14, J24
Suggested Citation: Suggested Citation