published in: Journal of Health Economics, 2008, 27 (5), 1312-1325
A positive relationship between socio-economic status (SES) and health, the so-called
"health-wealth gradient", is repeatedly found in most industrialized countries with similar
levels of health care technology and economic welfare. This study analyzes causality from
health to wealth (health causation) and from wealth to health (wealth or social causation) for
elderly couples in the US. Using six biennial waves of couples aged 51-61 in 1992 from the
Health and Retirement Study, we compare the recently developed strategy using Granger
causality tests of Adams et al. (2003, Journal of Econometrics) with tests for causality in
dynamic panel data models incorporating unobserved heterogeneity. While Adams et al.
tests reject the hypothesis of no causality from wealth to husband's or wife's health, the tests
in the dynamic panel data model do not provide evidence of wealth-health causality. On the
other hand, both methodologies lead to strong evidence of causal effects from both spouses'
health on household wealth.
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