Be wealthy to stay healthy

Abstract

Using the Household, Income and Labour Dynamics in Australia (HILDA) survey data, this study examines the effect of wealth on health transitions of older Australians. By focusing on health transitions instead of health status itself, the study avoids potential endogeneity of wealth arising from the reverse effect of health on wealth. Two health indicators are used to define health transitions: self-reported general health status and the existence of long-term health conditions. The results show that, for both health indicators, wealthy people are less likely to experience a transition from good to poor health, suggesting that wealth might have a causal effect on health.