Causal effect of income on health: Investigating two closely related policy reforms in Austria

Abstract

Abstract I investigate the effect of income on mortality of the pensioners, comparing three subsequent policy periods in Austria in the early 2000s. The pensioners who retired in the second period received 25% lower pension than those in the first period. This reduction in income was removed in the third policy period. These two reforms allow a causal identification of the effect of income on health. I estimate that lower pension income did not change the mortality rate. The results are confirmed using both experiments and different methods of estimation. Furthermore, with regard to the expenditure on health services, I find that only prescribed drug consumption increased, with the remaining analyzed factors being unaffected.