A single unexpected car repair or medical bill can permanently lower a person's life expectancy by several years.
April 26, 2026
Original Paper
Labor-Market Shocks, Delayed Repair, and Lifetime Health Inequality
SSRN · 6614298
The Takeaway
Financial shocks force poor households to delay high-return medical treatments, creating a permanent health gap. This repair failure means that inequality in survival is driven by immediate economic instability. Most people assume that health outcomes are a result of long-term lifestyle choices or general access to doctors. In reality, a temporary lack of cash during a crisis causes a feedback loop of physical decline that can never be fixed. This turns a short-term money problem into a lifelong biological disadvantage.
From the abstract
We estimate a continuous-time life-cycle model in which labor-market shocks affect health through non-convex medical repair. Using PSID, MEPS, and RAND HRS data, we show that financially fragile households respond to adverse shocks by moving closer to subsistence, working more intensely, and delaying high-return treatment. In the model's main application, skill-biased technical change widens inequality not only through wages but also through endogenous repair failure, generating concentrated low