Tinna Laufey Ásgeirsdóttir

Tinna Laufey Ásgeirsdóttir (Ph.D.), Professor of Economics and director of the masters program in health economics at the University of Iceland.
Email: ta@hi.is

The effect of a short-term increase in labor supply on health
Evidence suggests that physical health improves when the economy deteriorates. Two main hypothesies have been put forth to explain this association: (A) During economic expansions, risky health behavior becomes more common, such as alcohol and tobacco use. (B) Short-term increase in wages encourages individuals to temporarily draw on their health stock. Up until now, researchers have struggled with separating these two explanations empirically. An unique opportunity for such an analysis stems from a natural experiment that took place in Iceland 1987, when tax rates were temporarily reduced to zero as a result of a tax-system reconstruction. However, people did pay taxes in 1987 but for the previous year. Consequently, the gluttony effects (theory A) are minimized while the labor market effect (theory B) remains intact. In this research, the intention is to merge and analyze individual-level information on income with health data. The scientific contribution of the research is  to supply the literature on business cycles and health with clues regarding causal factors driving the observed relationship. Such information has policy implications for labor- and health-care markets. Thus, the research has both scientific and practical value.

Keywords: Business cycles, health, mortality, labor market