IZA DP No. 442: Estimating the Effect of Income on Health and Mortality Using Lottery Prizes as Exogenous of Variation in Income
published in: Journal of Human Resources, 2005, 40 (1), 144-168
A vast literature has established a strong positive association of income with health status and a negative association with mortality. This paper studies the effects of income on health and mortality, using only the part of income variation that is due to a truly exogenous factor: the monetary lottery prizes of individuals. The findings are that higher income causally generates good health and that this effect is of similar magnitude as when traditional estimation techniques are used. A 10 percent increase in income increases good health by about 0.01-0.02 standard deviations.