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The Effects of Health Insurance and Self‐Insurance on Retirement Behavior

  • Eric French
  • John Bailey Jones

\tThis paper presents and estimates a dynamic programming model model of retirement behavior that accounts explicitly for the effects of health cost volatility and and health insurance on retirement behavior. The model includes a savings decision so that we are able to analyze whether self-insurance is an important mechanism for understanding how greatly individuals value health insurance. We present preliminary estimates from the Health and Retirement Survey. We find that the possibility of self-insurance significantly lessens an individual's valuation of health insurance. Therefore, failure to account for self-insurance potentially leads to overestimates of the effect of health insurance and Medicare on retirement behavior.

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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 79 (2011)
Issue (Month): 3 (05)
Pages: 693-732

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Handle: RePEc:ecm:emetrp:v:79:y:2011:i:3:p:693-732
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