Income Receipt and Mortality - Evidence from Swedish Public Sector Employees

A large literature has established a positive long-run relationship between health and income, with lower mortality and morbidity rates for higher-income individuals. However, in developed countries mortality rates tend to follow a pro-cyclical pattern, suggesting that this positive association does not apply to temporary income changes on an aggregate level (Ruhm 2000, Neumayer 2004, Tapia Granados 2005). A possible explanation for this ambiguity is that income receipt has adverse short-run health effects that partly offset the positive long-run income/health association.

Evans and Moore (2011) show that mortality increases substantially following pay-check receipt amongst military personnel and the elderly. They suggest that this is related to an increase in economic activity upon income receipt, which in turn is linked to an increase in e.g. accidents, heart attacks and strokes. However, lack of individual variation in pay-days restricts them from separating the effect of income receipt from general within-month and within-week mortality patterns.

In this paper, we further address the relationship between income and mortality by studying the short-run association between periodic and expected income receipt and death rates. Using individual data with daily records, we estimate the causal effect of pay-check receipt on mortality for Swedish public sector employees during a six year period. For identification, we exploit variation in pay days across work-places and within work-places over time. Our strategy allows us to completely control for mortality patterns related to e.g. holidays and other special days or events coinciding with pay-days and for general within-month and within-week mortality patterns related to e.g. habits, mortgage payments etc.

Our sample corresponds to approximately 30% of the Swedish work force and is heterogeneous in age, income and education, enabling us to study between-group differences in the mortality response to income receipt. Information on the causes of death is linked to each deceased individual, allowing us to study the mechanisms behind the mortality effect.

We find a dramatic increase in total mortality on the day pay-checks arrive. The increase is especially pronounced for young individuals and for deaths due to circulatory conditions, e.g. heart conditions and strokes. This is consistent with an increase in general activity being an important cause of the excess mortality. The effect is entirely driven by lower income individuals, suggesting that liquidity constraints are an important factor behind the mortality response. A within-month mortality cycle obscures the effect of pay-check receipt, suggesting that the causal effect is substantially larger than the estimate found by Evans and Moore (2011).