Health and the savings of insured versus uninsured, working-age households in the U.S
AbstractThis paper examines the effect of a decline in health on the savings and portfolio choice of young, working individuals and the differences between insured and uninsured cohorts using the 2001 Survey of Income and Program Participation. We find that insured individuals are significantly likely to divest from risky asset holdings in response to a decline in health, controlling for variables such as income, age, and out-of-pocket medical expenses. Unlike many previous papers, which dismiss health and portfolio choice associations among retired individuals on the basis of unobserved heterogeneity, we find that our results for working individuals are robust when using fixed effects models in a three-year longitudinal panel. Consistent with an overall theory of risk, we find that the relationship between an onset of poor health and an increased aversion to risky assets among the insured is strongest (only apparent) among married-couple households.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-09-23.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Web page: http://www.chicagofed.org/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-HEA-2010-01-10 (Health Economics)
- NEP-IAS-2010-01-10 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- King, Mervyn A. & Leape, Jonathan I., 1998. "Wealth and portfolio composition: Theory and evidence," Journal of Public Economics, Elsevier, vol. 69(2), pages 155-193, June.
- Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
- Lillard, Lee A & Weiss, Yoram, 1997.
"Uncertain Health and Survival: Effects on End-of-Life Consumption,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 15(2), pages 254-68, April.
- Lillard, L.A. & Weiss, Y., 1996. "Uncertain Health and Survival: Efefcts on End-of-Life Consumption," Papers 7-96, Tel Aviv.
- David A. Love & Paul A. Smith, 2010.
"Does health affect portfolio choice?,"
John Wiley & Sons, Ltd., vol. 19(12), pages 1441-1460, December.
- David Love & Paul A. Smith, 2008. "Does Health Affect Portfolio Choice?," Department of Economics Working Papers 2008-11, Department of Economics, Williams College.
- Paul Smith & David Love, 2007. "Does health affect portfolio choice?," Finance and Economics Discussion Series 2007-45, Board of Governors of the Federal Reserve System (U.S.).
- Harvey S. Rosen & Stephen Wu, 2003.
"Portfolio Choice and Health Status,"
NBER Working Papers
9453, National Bureau of Economic Research, Inc.
- Greene, W., 2001.
"Fixed and Random Effects in Nonlinear Models,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
01-01, New York University, Leonard N. Stern School of Business-.
- James Smith & Raynard Kington, 1997.
"Demographic and economic correlates of health in old age,"
Springer, vol. 34(1), pages 159-170, February.
- James P. Smith & Raynard Kington, 2004. "Demographic and Economic Correlates of Health in Old Age," Labor and Demography 0408008, EconWPA.
- Smith, J-P & Kington, R, 1997. "Demographic and Economic Correlates of Health in Old Age," Papers 97-06, RAND - Reprint Series.
- Fan, Elliott & Zhao, Ruoyun, 2009. "Health status and portfolio choice: Causality or heterogeneity?," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1079-1088, June.
- Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000.
"Do the rich save more?,"
Finance and Economics Discussion Series
2000-52, Board of Governors of the Federal Reserve System (U.S.).
- Edwards, Ryan D, 2008. "Health Risk and Portfolio Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 472-485.
- James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
- Annette Vissing-Jorgensen, 2002. "Towards an Explanation of Household Portfolio Choice Heterogeneity: Nonfinancial Income and Participation Cost Structures," NBER Working Papers 8884, National Bureau of Economic Research, Inc.
- Robert M. Townsend, 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 83-102, Summer.
- Stephen Wu, 2003. "The Effects of Health Events on the Economic Status of Married Couples," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
- Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores).
If references are entirely missing, you can add them using this form.