Social scientists have long known that those with higher incomes have a greater life expectancy than those with less income. But researchers have had a hard time proving that a higher income causes people to live longer. For example, poor health could reduce earnings, meaning that low income may be caused by poor health, and not the other way around.
Two University of Maryland economists found a solution to this predicament by using a 1977 change in the Social Security law. Legislation in that year created a 'notch' in Social Security benefits based upon date of birth; those born before January 1, 1917 generally receive higher benefits than those born afterwards. The researchers decided to compare mortality rates after age 65 for males born in the second half of 1916 and the first half of 1917. This would allow them to match up people who had identical earnings histories but who had substantially different retirement incomes based on their birth dates. (The researchers adjusted for any possible differences in mortality that might be due to whether an individual was born in the last half of 1916 or the first half of 1917.)
Contrary to expectations, the researchers found that the higher income group had a significantly higher mortality rate. They also found that the younger group (the one born in 1917) responded to their lower post-retirement incomes by taking on more part-time work. 'These results suggest that moderate employment has beneficial health effects for the elderly,' the researchers conclude.
Stephen E. Snyder and William N. Evans, "The Impact of Income on Mortality: Evidence from the Social Security Notch," National Bureau of Economic Research (Sep 2002).
For more on the study, go to: http://papers.nber.org/papers/W9197
A version of the study may also be downloaded in PDF format from Prof. Evans' Web site at http://www.bsos.umd.edu/econ/evans/wrkpap.htm