Mortality, Human Capital and Persistent Inequality

Abstract

Available evidence suggests high intergenerational correlation of economic status, and persistent disparities in health status between the rich and the poor. This paper proposes a novel mechanism linking the two. We introduce health human capital into a two-period overlapping generations model. Private health investment improves the probability of surviving from the first period of life to the next and, along with education, enhances an individual's labor productivity. Poorer parents are of poor health, unable to invest much in reducing mortality risk and improving their human capital. Consequently, they leave less for their progeny. Despite convex preferences, technology and complete markets, initial differences in economic and health status may perpetuate across generations.

Aging society, health and the environment

“…Blackburn and Cipriani 2002;de la Croix and Licandro 1999;Hazan and Zoabi 2006;Cervellati and Sunde 2005). In this body of literature, the main and often unique determinant of longevity is generally represented by health expenditure, either privately (Chakraborty and Das 2005) or publicly funded (Chakraborty 2004;Osang and Sarkar 2005;Bhattacharya and Qiao 2007). Our model contribute to the latter group of literature in two respects.…”

“…Most of the literature features similar assumptions, but usually considers only one determinant of health(Chakraborty and Das 2005;Osang and Sarkar 2008;Bhattacharya and Qiao 2007;Kalemli- Ozcan et al 2000;Fioroni 2010). A two-input longevity function is considered byFinlay (2006) andLeroux et al (2011) who, in addition to health spending, have respectively a health base-level and an amount of genes, which are however exogenous in either model.…”

“…With respect to healthspending, the same conditions given in the text are assumed. 4 SeeChakraborty and Das (2005). In models with endogenous survival a cardinal assumption on the utility function is usually required since utility enters in level in the first order conditions with respect to the longevity inputs.…”

“…7 This may occur for a number of reasons which are surveyed byBrown and Wharshawsky (2001). See alsoChakraborty and Das (2005).…”

Impact of socio-economic determinants of demand for health for investment purpose

“…O'Brien (2003) reported that individuals with poor health or with specific health conditions like arthritis, depression or other psychological disorders, or chronic backache, for example, work less and earn less than do people in good health. Chakraborty and Das (2005) argue that absenteeism (and presenteeism) and premature retirement due to ill-health can be reduced and avoided by investment in health. As a person ages her stock of health depreciates which is, of course, "merely one manifestation of the biological process of aging" (Grossman, 1972a;p.…”