Monthly income volatility and health outcomes

A growing literature shows that income volatility has negative effects on household well-being. Using the Survey of Income and Program Participation, we use temporal ordering to investigate the relationship between monthly household income volatility and the subsequent change in self-reported health status of the household head. For liquidity constrained households, a one standard deviation increase in volatility over 24 months leads to a 1.3%–4.3% increase in the probability of worsened health. The magnitude of this effect is approximately two-thirds that of the impact of a one standard deviation change in the level of mean household income.