Understanding differences in life expectancy inequality

The life expectancy gap at age 40 between high income and low income individuals is substantial. I explore how medical expenditures and unhealthy behaviors account for the life expectancy gap. The data reveals the following. First, low income individuals tend to spend more on healthcare than high income individuals at all ages. Moreover, health disparities by income is salient due to differences in unhealthy behaviors such as heavy smoking. To answer how much dierences in access to medical services and unhealthy behaviors can explain in light of these stylized facts, I construct a life cycle model. The distinctive features of the model are that it flexibly incorporates unobserved, potentially correlated initial human and health capital stocks and embed unhealthy behaviors. Furthermore, the model includes two health systems: private health insurance and Medicare. The main findings are i) differences in access to medical care driven by income inequality potentially accounts for 12.5% of the life expectancy gap, ii) health insurance increases longevity for low income individuals, but modestly, iii) the health condition when young shapes the trend in average medical expenditures by income groups and iv) the impact of differences in unhealthy behaviors is predominant in understanding the life expectancy gap.

That is from Tomoaki Kotera, a job candidate from the University of Wisconsin, here is the paper itself.


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