Relationship between Health Expenditure and Household Incomes

Abstract

The causality debate surrounding the social health gradient is not a boxing match in which a knockout blow will eventually be delivered. In middle and at older ages, there are pronounced effects of new health events on household income and wealth, but it is an open question how much earlier in the life-cycle such a sweeping statement is true. While economic resources also appear to impact health outcomes, this may be most acute during childhood and early adulthood when health levels and trajectories are being established. Innovative methods that help isolate economic and health shocks would be informative on this vexing issue of causality. Economists have already used ‘natural experiments’ such as lotteries to isolate wealth effects. On the health side, clinical trials—which often contain tens of thousands of observations—have focused on the efficacy of treatment and on health outcomes. These trials could be expanded to include more economic content so that the impacts of health on economic status can be measured. These issues are important and economists should participate in the verdict that will eventually be rendered.

Keywords: health expenditure, income, relationship, household