New evidence on the relationship between income and health.

Using data from the National Survey of Families and Households, the Survey of Income and Program Participation, and the National Health Interview Survey, I estimate the structural impact of income on the following measures of health: self-assessed health status, work and functional limitations, bed days, average daily consumption of alcohol, and scales of depressive symptoms and alcoholic behavior. Both ordinary and IV estimates indicate that increases in income significantly improve mental and physical health but increase the prevalence of alcohol consumption. Cost-benefit analyses of government policies that may reduce disposable income should take into account potential effects on morbidity.