Abstract: We study chronic illness to analyze the evolution of health inequalities over the life-cycle. Using rich administrative data in the Netherlands, we find that measurable chronic conditions explain about 30-40% of the mortality gap between income groups at old age, but the gap in chronic illness already opens up in early adulthood. By age 35, the bottom 50% have exceeded the chronic illness burden of 50-year olds in the top 50%. Leveraging our panel data, we show that low-income individuals develop chronic illness at a faster rate and that chronically-ill individuals sort into lower income groups. Aggregated over the life-cycle, the ageing channel is about 50% more important than the sorting channel. Our analysis demonstrates the value of health interventions that target the incidence of chronic conditions for low-income groups already earlier in life, before affecting mortality later in life. Our analysis of mediating factors indicates the importance of location relative to health behaviors, especially at younger ages.

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