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Do wealth shocks matter for the life satisfaction of the elderly? Evidence from the health and retirement study

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  • Marco Cozzi

    (University of Victoria)

  • Qiushan Li

    (University of Calgary)

Abstract

We study the importance of wealth shocks as a determinant of life satisfaction for the elderly and near-elderly. With data from the U.S. Health and Retirement Study, we specify an econometric analysis exploiting the 2008-09 financial crisis as a source of exogenous variation in wealth, caused by a long-lasting decrease in asset prices. Although absolute changes in wealth are not found to systematically affect individual well-being, losing 60% or more of the pre-crisis wealth negatively impacted measures of life satisfaction. The results are shown to hold also in a number of robustness checks. The financial crisis wealth shock is found to have a persistent detrimental effect on the well-being of the American elderly. Finally, we argue that the simultaneity bias arising from neglecting the endogeneity of wealth accumulation can be substantial.

Suggested Citation

  • Marco Cozzi & Qiushan Li, 2024. "Do wealth shocks matter for the life satisfaction of the elderly? Evidence from the health and retirement study," Economics Bulletin, AccessEcon, vol. 44(1), pages 88-98.
    • Handle: RePEc:ebl:ecbull:eb-21-01013
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    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • D1 - Microeconomics - - Household Behavior

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