Description:
We construct a unified objective measure of health status: the frailty index, defined as the cumulative sum of all adverse health indicators observed for an individual. First, we show that the frailty index has several advantages over self-reported health status, particularly when studying health dynamics. Then we estimate a stochastic process for frailty dynamics over the life cycle. We find that the autocovariance structure of frailty in panel data strongly supports a process that allows the conditional variance of frailty shocks to increase with age. Our frailty measure and dynamic process can be used by researchers to study the evolution of health over the life cycle and its economic implications.