Financial determinants of lifestyle

A controversial debate exists among scientists regarding the origin of the widely observed socioeconomic gradient in health. It has been proposed frequently that lifestyle could be an important factor in the relationship between socioeconomic factors and health. In contributing to this area of research, the effect of financial variables on lifestyle shall be analyzed more closely in this paper. For this purpose, theoretical formulations concerning the effect of a change in individual wealth as well as of a change in an individuals’ wage on lifestyle that are established by Galama and van Kippersluis(2010) are tested empirically. Regarding lifestyle, the theoretical framework differentiates between the consumption of healthy goods, the consumption of unhealthy goods and the investment in preventive care measures. A change in wage is predicted to have a negative effect on all three behaviors, whereas a change in wealth is assumed to be positively influential on healthy consumption and preventive care investment, but can have a positive or a negative effect on unhealthy consumption. The empirical estimates regarding the effect of wealth on lifestyle confirm theoretical predictions in 83% of theregressions performed. Regarding the eect of wage, 76% of the regressions yield the expected effect. Furthermore, the effect of household income on lifestyle is analyzed empirically, as income also seems to play an important role in the determination of lifestyle. The empirical analysis is carried out on the basis of the Health and Retirement Survey (HRS), a panel data study conducted by the RAND association.