Is Chronic Health a Normal Good? Evidence from the Effect of Hypertension Diagnosis on Food Consumption
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Income and chronic health outcomes often do not exhibit a clear empirical relationship,despite the conventional wisdom that health itself is a normal good. We identify health information as the key to understanding the multiple effects of income on the demand for health. As their incomes rise, richer individuals demand both better health and more health information, yet unhealthy foods such as sweets and fatty and oily foods also become more affordable. Using the health capital framework of Grossman (JPE, 1972), this study tests the hypotheses that individuals adjust their diet in a healthier direction upon receiving negative health information, and that the effect is larger for richer individuals. Both measurement and endogeneity of hypertension information present challenges to identifying causal relationships between diet, chronic health conditions and health information. To overcome both of these problems, we adopt a regression discontinuity design approach that exploits the exogenous cutoff of systolic blood pressure in the diagnosis of hypertension. Based on unique Chinese longitudinal data, we find the following: richer individuals are more likely to develop hypertension; the positive income-hypertension gradient disappears once past food consumption is controlled for; upon receiving a diagnosis of hypertension, individuals reduce fat intake significantly; and richer individuals reduce their fat intake more in response to hypertension diagnosis.
RPRT
WIAS Discussion Paper No.2011-001
Zhao, Meng
Konishi, Yoshifumi
Glewwe, Paul
2011
Waseda Institute for Advanced Study
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