Lifestyle Behaviors and Wealth-Health Gaps in Germany

57 Pages Posted: 29 Mar 2022

See all articles by Lukas Mahler

Lukas Mahler

University of Mannheim

Minchul Yum

University of Southampton; CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: February 2022


We document significant gaps in wealth across health status over the life cycle in Germany---a country with a universal healthcare system and negligible out-of-pocket medical expenses. To investigate the underlying sources of the empirical patterns in wealth-health gaps, we build a heterogeneous-agent life-cycle model in which health and wealth evolve endogenously. In the model, agents exert efforts to lead a healthy lifestyle, which helps maintain good health status in the future. Effort choices, or lifestyle behaviors, are subject to adjustment costs to capture various aspects of micro-level effort adjustment behaviors in the data. We find that our calibrated model generates around half of the wealth gaps by health observed in the German micro data, and that variations in health-related lifetime outcomes are largely explained by uncertainty realizations over the life cycle, rather than initial conditions at age 25. Our counterfactual experiments indicate that variations in individual health efforts account for over half of the model-generated wealth gaps by health status. Their importance is due not only to the fact that they affect labor income and savings rates, both of which influence wealth accumulation, but also because they act as an amplification device since richer households exert relatively more efforts to maintain a healthy lifestyle.

Keywords: Germany, Health inequality, Healthy Lifestyle, Wealth Inequality

JEL Classification: D3, E2, I1

Suggested Citation

Mahler, Lukas and Yum, Minchul, Lifestyle Behaviors and Wealth-Health Gaps in Germany (February 2022). CEPR Discussion Paper No. DP17036, Available at SSRN:

Lukas Mahler (Contact Author)

University of Mannheim ( email )

D7, 27
Mannheim, 68131

Minchul Yum

University of Southampton ( email )

United Kingdom

CEPR ( email )

United Kingdom

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