The Role of Health Status on Income in China
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The economic benefits from improving health status are obvious, yet there remains a lack
of agreement on how to quantify and compare the benefits and the accompanied costs. In
our study, we extend Liu et al. (2008)’s study on the role of health status on income in
China and examine whether their conclusions still hold under new specifications and in a
broader time horizon. Our results show a larger impact of health status on income after
replacing household income with individual income. We find this effect becomes even
more pronounced in the 2000s. Moreover, our results show an inverted-U relationship
between age and income, which is an improvement over Liu et al. (2008)’s work and is in
line with other empirical studies. By admitting the endogeneity issue, we find the impact
of health status becomes even larger after instrumenting health status. The results of
GMM estimation, which allows for efficient estimation under heteroskedasticity of
unknown form, are consistent the IV estimations.