Abstract
Studies have found substantial differences in health-related behavior and health care usage between educational groups, which may explain part of the well-documented educational gradient in health. The allocative efficiency hypothesis offers a behavioral explanation for these reported differences. According to this theory, the educated possess more health knowledge and information, allowing them to make better health choices. We perform a mediation analysis to study this mechanism using original survey data from the Philippines, a lower-middle-income country. As an extension of previous empirical research, we construct a comprehensive index that captures different dimensions of health knowledge. Using generalized propensity scores, we find strong support for the allocative efficiency argument. Schooling is significantly associated with health knowledge levels, which explain up to 69% of the education effect on health lifestyle. This corresponds to twice the mediation strength of economic resources, suggesting an important role of this factor in explaining education effects on health decisions.