The causal effect of income on health: evidence from German reunification

J Health Econ. 2005 Sep;24(5):997-1017. doi: 10.1016/j.jhealeco.2005.01.004. Epub 2005 Mar 2.


We investigate whether there was a causal effect of income changes on the health satisfaction of East and West Germans in the years following reunification. Our data source is the German Socio-Economic Panel (GSOEP) between 1984 and 2002, and we fit a recently proposed fixed-effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition. We find evidence of a significant positive effect of income changes on health satisfaction, but the quantitative size of this effect is small. This is the case with respect to current income and a measure of 'permanent' income.

Publication types

  • Comparative Study
  • Review

MeSH terms

  • Adult
  • Consumer Behavior / statistics & numerical data
  • Female
  • Germany
  • Health Status*
  • Humans
  • Male
  • Middle Aged
  • Models, Econometric
  • Social Class*