Are There Health Returns to Transfer Income? An Instrumental Variable Approach

Kate W. Strully, Harvard School of Public Health

Do redistributive income transfer programs improve the health of at-risk populations and work to reduce health disparities? Estimating the health returns of transfer income, and attempting to answer this question, can be very tricky because selection into different income transfer programs may lead to various forms of bias. In this paper, I use data from the March Current Population Survey to estimate the health returns of transfer income, attempting to factor out possible selection biases by using state-level policy variations as instrumental variables. More specifically, I run separate analyses for unemployment insurance and the Earned Income Tax Credit, using state variations in the policies that govern these programs as sources of exogenous variation.