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Household portfolio choices, health status and health care systems: A cross-country analysis based on SHARE

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  • Atella, Vincenzo
  • Brunetti, Marianna
  • Maestas, Nicole

Abstract

Health risk is increasingly viewed as an important form of background risk that affects household portfolio decisions. However, its role might be mediated by the presence of a protective full-coverage national health service that could reduce households’ probability of incurring current and future out-of-pocket medical expenditures. We use SHARE data to study the influence of current health status and future health risk on the decision to hold risky assets, across ten European countries with different health systems, each offering a different degree of protection against out-of-pocket medical expenditures. We find robust empirical evidence that perceived health status matters more than objective health status and, consistent with the theory of background risk, health risk affects portfolio choices only in countries with less protective health care systems. Furthermore, portfolio decisions consistent with background risk models are observed only with respect to middle-aged and highly-educated investors.

Suggested Citation

  • Atella, Vincenzo & Brunetti, Marianna & Maestas, Nicole, 2012. "Household portfolio choices, health status and health care systems: A cross-country analysis based on SHARE," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1320-1335.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:5:p:1320-1335
    DOI: 10.1016/j.jbankfin.2011.11.025
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    Cited by:

    1. Kronenberg, C. & van Kippersluis, H. & Rohde, K.I.M., 2014. "What drives the association between health and portfolio choice?," Health, Econometrics and Data Group (HEDG) Working Papers 14/27, HEDG, c/o Department of Economics, University of York.
    2. Dana Goldman & Nicole Maestas, 2013. "Medical Expenditure Risk And Household Portfolio Choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 527-550, June.
    3. Becker, Gideon, 2014. "The portfolio structure of German households: A multinomial fractional response approach with unobserved heterogeneity," University of Tuebingen Working Papers in Economics and Finance 74, University of Tuebingen, Faculty of Economics and Social Sciences.
    4. repec:kap:rqfnac:v:49:y:2017:i:1:d:10.1007_s11156-016-0589-6 is not listed on IDEAS
    5. Koch, Alexander K. & Nafziger, Julia, 2016. "Goals and bracketing under mental accounting," Journal of Economic Theory, Elsevier, vol. 162(C), pages 305-351.
    6. repec:eee:hapoch:v1_993 is not listed on IDEAS

    More about this item

    Keywords

    Household portfolios; Health status; National health care systems;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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