Health, education and time preference

Abstract

Education has been shown to be the most important correlate of health. However, the mechanism through which education influences health has been largely unexplained. Grossman argued that education improves health production efficiency. In contrast, Fuchs argued that the association between health and education is not primarily causal but reflects unobserved causes of both outcomes. Instead of education causing better health, some 'third' variables may be related to both education and health. The 'third' variable most frequently mentioned is time preference. The aim of this paper is to investigate the role of time preference in the relationship between education and health. The role of risk attitude is also investigated. The paper exploits a unique data set of households that incorporated stated preference questions eliciting individuals' time preferences. The results show that the effect of education reduces but does not disappear when controlling for individuals' time preferences.