1 Introduction
The central question addressed by this paper is: To what extent can variations in net wealth among the New Zealand population, aged 15 years and older, be explained by differences in health status? There has been little study of the association between health and wealth in New Zealand, although strong links between the two have been found overseas.
Wealth can be an indicator of both economic success and of financial security. The opportunity to accumulate wealth will depend, in part, on an individual's participation in the labour force and their productivity, factors which in turn may well be governed by their health status. Accumulated wealth represents an individual's ability to consume if they are unemployed or out of the workforce and personal wealth can be invested to generate income. As the New Zealand population ages, an increasing proportion of the population will be retired and will be drawing on their accumulated wealth for consumption. Imperfect health may lead to less time spent in the workforce and higher health costs.
Health is of interest in New Zealand as the Government allocates about 20% of each year's budget to the provision of public health (Bryant, Teasdale, Tobias, Cheung and McHugh, 2004). In making funding decisions the Government decides how much of the cost of health care should be borne by the public and how much by the consumers of health care. If imperfect health has negative effects on a person's ability to accumulate wealth then finding ways to address this will improve the overall wellbeing of the New Zealand population.
The analysis reported in this paper is based on unit record data from a household survey. Regression models were estimated for net wealth as a function of health and other variables. Poor health may have negative effects on an individual's rate of wealth accumulation, while lower levels of wealth may have negative health implications. Establishing causality was not possible with the available data. The focus is on modelling the association between health and wealth without considering causality. This paper also does not consider the effects of changes in policy on health or wealth.
Health status and wealth both develop gradually over the life cycle. Furthermore, they can both also change rapidly in response to events. However, these sudden events are likely to be correlated with long-run developments: for example, people with more human capital are less likely to be hit with unemployment shocks to wealth; people with a lifetime of poor lifestyle are more likely to experience an adverse health shock, and to have less wealth. This underscores the fact that health and wealth are both jointly determined and evolve over time. Ideally, one needs longitudinal data to adequately capture the dynamic interrelationships. Furthermore, identifying the direction of causality between wealth and health is a complex challenge, and an issue far from resolved in the literature. This paper relies on exploring associations without pretending to establish causality.
This study relies on cross-sectional data and as such does not attempt to explore the long-run evolution and interrelation between health and wealth. To the extent that the study identifies an association between health and wealth from the cross-sectional data, it is recognised that this is merely a snapshot of a process that evolves over the life cycle. One can envisage that some people will place greater emphasis on the future (ie, have lower discount rates) and as a result invest more in both their human and non-human wealth, resulting in jointly determined higher levels of health and wealth.
This paper is set out as follows: Section 2 reviews work already done in similar areas. Section 3 explains the data and Section 4 sets out the models used in this paper. The main results can be found in Section 5, with supporting results in Section 6. Section 7 concludes. An extensive set of results is presented in the appendices.
