 Health and Earnings: a General Equilibrium EvaluationAntónio Antunes and Valerio Ercolani Research in Economics, 2021, vol. 75, issue 3, 203-214 Abstract: We study the economic impact of changes in health focusing on one specific transmission channel: earnings. We develop a general equilibrium model where earnings are affected by health status and shocks, and workers may influence the level of their health status through investment. After calibrating the model for the U.S., we perform two sets of exercises. First, we simulate the occurrence of a large and transitory health shock that has the characteristics of one of the worst health catastrophes in modern times, the 1918 influenza pandemic. We estimate that efficient labor drops on impact by more than 4%, inducing a fall of approximately 30 basis points in the return to assets and a moderate increase in the wage rate. The implied output loss amounts to roughly 3%. These effects—especially on prices and consumption—are persistent. Second, we do a comparative steady-state analysis in order to measure the effects of permanent changes in health resulting from policy changes. We show that omitting general equilibrium effects (e.g., prices effects) produces a bias in measuring the impact of health risks’ changes. Keywords: Health shocks; Health risk; Earnings; Endogenous health; General equilibrium effects; 1918 Spanish flu (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:75:y:2021:i:3:p:203-214 DOI: 10.1016/j.rie.2021.05.001 Access Statistics for this article Research in Economics is currently edited by Federico Etro More articles in Research in Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.