Health, wage rate and the optimal treatment strategy

Purpose – The purpose of this study is to examine the relationship between wages and health, with the objective of identifying the conditions under which an optimal treatment strategy can minimize financial resource waste. Design/methodology/approach – The study employs a foundational labor economics model that integrates wages, leisure, and health. This theoretical approach is supported by a panel threshold econometric analysis using data from 20 OECD countries over the period 2003 to 2022. Findings – The analysis reveals that the effect of wages on health status is heterogeneous, with both positive and negative impacts depending on the wage level. A specific range of wage rates is identified in which disease prevention is more efficient than treatment. The econometric results indicate a threshold wage rate of $28.517, which corroborates the theoretical model. Research limitations/implications – The analysis is constrained by data availability, limiting the sample to 20 OECD countries. Practical implications – The findings offer policy-relevant insights for public health authorities, emphasizing the importance of choosing appropriate treatment strategies to reduce negative externalities. The results also underscore the necessity of designing income-sensitive interventions to enhance public health outcomes. Originality/value – This study is the first to provide a unified theoretical and empirical explanation of the dual effects, both beneficial and adverse, that higher wage rates can have on health.