The Impact of Health on Wealth: Empirical Evidence

TitleThe Impact of Health on Wealth: Empirical Evidence
Publication TypeReport
Year of Publication2020
AuthorsGhimire, U
Series TitleDepartment of Economics Working Paper Series
Document Number2020-19
InstitutionUniversity of Connecticut
CityStorrs, CT
Keywordshealth, Wealth

This paper empirically evaluates the impact of health on wealth. Using the frailty
index as a measure of health and carefully accounting for the dynamic relationship
between frailty and wealth, I find that suffering one more health deficit leads, on
average, to a 2.45 percent decline in the household net worth of individuals between
age 50 and 100. The household net worth of individuals with no college degree, poor
health, and over the age of 70 is significantly negatively affected by poor health. The
results pass the tests of instrument validity and are consistent across several alternative
definitions of wealth. Using financial net worth as a definition of wealth, I find that the
average impact of frailty on wealth is the largest, while it is the smallest when wealth
is defined to include only housing net worth.

Citation Key11346