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Can Wealth Buy Health? A Model of Pecuniary and Non-Pecuniary Investments in Health

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  • Panos Margaris
  • Johanna Wallenius

Abstract

In this paper, we develop a life cycle model that features pecuniary and non-pecuniary investments in health in order to rationalize the socioeconomic gradients in health and life expectancy in the United States. Agents accumulate health capital, which affects labor productivity, utility, the distribution of medical spending shocks, and life expectancy. We find that unequal health insurance coverage plays a negligible role in generating the observed gaps in health and longevity. Universal health insurance increases preventive medical spending but not time spent in health promoting activities, as individuals are no longer worried about avoiding high curative medical expenditure shocks due to increased health insurance coverage. Our findings suggest that differences in lifetime income, preferences, and health shocks are the main determinants of inequality in life expectancy.

Suggested Citation

  • Panos Margaris & Johanna Wallenius, 2024. "Can Wealth Buy Health? A Model of Pecuniary and Non-Pecuniary Investments in Health," Journal of the European Economic Association, European Economic Association, vol. 22(3), pages 1097-1138.
    • Handle: RePEc:oup:jeurec:v:22:y:2024:i:3:p:1097-1138.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvad044
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    Cited by:

    1. Jeremy Greenwood & Nezih Guner & Karen A. Kopecky, 2022. "The Downward Spiral," NBER Working Papers 29764, National Bureau of Economic Research, Inc.
    2. Richard Foltyn & Jonna Olsson, 2024. "Subjective life expectancies, time preference heterogeneity, and wealth inequality," Quantitative Economics, Econometric Society, vol. 15(3), pages 699-736, July.

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    More about this item

    JEL classification:

    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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