The optimal stock of health with endogenous wages. Application to partial disability compensation.

The optimal quantity of health is examined in the framework of a model which posits that health capital will influence earning capacity in addition to the supply of labor. Utilizing data from the Survey of Disabled and Nondisabled Adults, eight health capital variables are tested in models of hourly wages, labor supply and yearly earnings. The results for three of the health capital variables are then compared to their evaluation by the American Medical Association and by the New York State Workers' Compensation program.