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Mortality Risk and Consumption by Couples

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  • Michael D. Hurd

Abstract

This paper proposes and analyzes a life-cycle model of consumption by couples. The model is considerably more complicated than the standard model for singles because it has to account for the welfare of a surviving spouse. The determinants of consumption are the survival paths of each spouse, bequeathable wealth, the flow of annuities both before and after the death of one of the spouses, a motive for bequeathing at the death of the surviving spouse, and the parameters of the utility functions of the couple and of each spouse if widowed. The analysis shows how consumption and the rate of change of bequeathable wealth react to variations in these determinants, and it compares the consumption level of a single person to a couple. Summaries of wealth change and consumption in panel data are given which offer general support for the life-cycle model.

Suggested Citation

  • Michael D. Hurd, 1999. "Mortality Risk and Consumption by Couples," NBER Working Papers 7048, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7048
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    7. Laitner, John & Juster, F Thomas, 1996. "New Evidence on Altruism: A Study of TIAA-CREF Retirees," American Economic Review, American Economic Association, vol. 86(4), pages 893-908, September.
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    12. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
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    Cited by:

    1. Aydilek, Asiye, 2016. "The allocation of time and puzzling profiles of the elderly," Economic Modelling, Elsevier, vol. 53(C), pages 515-526.
    2. Jan Rouwendal, 2009. "Housing Wealth and Household Portfolios in an Ageing Society," De Economist, Springer, vol. 157(1), pages 1-48, March.
    3. Janice Compton & Robert A Pollak, 2021. "The life expectancy of older couples and surviving spouses," PLOS ONE, Public Library of Science, vol. 16(5), pages 1-13, May.
    4. Michael D. Hurd & James P. Smith, 2001. "Anticipated and Actual Bequests," NBER Chapters, in: Themes in the Economics of Aging, pages 357-392, National Bureau of Economic Research, Inc.
    5. Felix Freyland, 2005. "Household Composition and Savings: An Overview," MEA discussion paper series 05087, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Michael D. Hurd & James P. Smith & Julie Zissimopoulos, 2007. "Inter-vivos Giving Over the Lifecycle," Working Papers 524, RAND Corporation.
    7. Michael D. Hurd & James P. Smith & Julie Zissimopoulos, 2007. "Inter-vivos Giving Over the Lifecycle," Working Papers WR-524, RAND Corporation.
    8. Kapteyn, Arie & Alessie, Rob & Lusardi, Annamaria, 2005. "Explaining the wealth holdings of different cohorts: Productivity growth and Social Security," European Economic Review, Elsevier, vol. 49(5), pages 1361-1391, July.
    9. Michael D. Hurd & Susann Rohwedder, 2013. "Wealth Dynamics and Active Saving at Older Ages," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 388-413, National Bureau of Economic Research, Inc.
    10. Shelly J. Lundberg & Jennifer Ward-Batts, 2000. "Saving for Retirement: Household Bargaining and Household Net Worth," Econometric Society World Congress 2000 Contributed Papers 1414, Econometric Society.
    11. Siu Fai Leung, 2000. "Why Do Some Households Save So Little? A Rational Explanation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 771-800, October.
    12. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Savings after Retirement: A Survey," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    13. Michael Hurd & James P. Smith, 2002. "Expected Bequests and Their Distribution," NBER Working Papers 9142, National Bureau of Economic Research, Inc.
    14. Michael Hurd & Elaine Reardon, 2003. "Real Wealth Changes from 1982 to 1991 Among the Newly Retired," Working Papers 03-15, RAND Corporation.
    15. Carlos Vidal-Melia & Ana Lejárraga-García, 2004. "The Bequest Motive And Single People’S Demand For Life Annuities," Public Economics 0405005, University Library of Munich, Germany.
    16. Mariacristina De Nardi & Eric French & John Bailey Jones, 2015. "Couples' and Singles’ Savings After Retirement," Working Papers wp322, University of Michigan, Michigan Retirement Research Center.
    17. Michael Hurd, 2003. "Are Bequests Accidental or Desired?," Working Papers 03-13, RAND Corporation.
    18. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    19. Michael Hurd & James P. Smith & Julie Zissimopoulos, 2007. "Inter-vivos Giving Over the Lifecycle," Working Papers 524, RAND Corporation.
    20. Mauro Baranzini, 2005. "Modigliani's life-cycle theory of savings fifty years later," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 109-172.
    21. Raun Ooijen & Rob Alessie & Adriaan Kalwij, 2015. "Saving Behavior and Portfolio Choice After Retirement," De Economist, Springer, vol. 163(3), pages 353-404, September.
    22. Freyland, Felix, 2004. "Household composition and savings : an overview," Papers 04-69, Sonderforschungsbreich 504.
    23. Michael Hurd & Arie Kapteyn, 2003. "Health, Wealth, and the Role of Institutions," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
    24. Michael D. Hurd & Susann Rohwedder, 2008. "Adequacy of Economic Resources in Retirement and Returns-toscale in Consumption," Working Papers wp174, University of Michigan, Michigan Retirement Research Center.
    25. Vesile Kutlu-Koc & Rob Alessie & Adriaan Kalwij, 2017. "Consumption Behavior, Annuity Income and Mortality Risk of Retirees," De Economist, Springer, vol. 165(3), pages 349-380, September.

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    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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