IDEAS home Printed from https://ideas.repec.org/p/cep/sticas/case136.html
   My bibliography  Save this paper

The Effect of Health on Consumption Decisions in Later Life: Evidence from the UK

Author

Listed:
  • Eleni Karagiannaki

Abstract

The analysis in this paper focuses on the impact of health on the savings and consumption decisions of the elderly. In principle, there are at least five alternative channels through which health may affect consumption and savings. Ill health may affect both consumption capacities and needs while the risk of deteriorating health might increase subjective mortality expectations inducing higher consumption. Conversely ill health may induce lower consumption and an increase in precautionary savings given that agents may anticipate increased consumption needs following a negative health shock. Our main objective in this paper is to describe how consumption decisions of the elderly adjust to health changes and to disentangle of the different channels through which consumption responds to health changes. To identify the effect of health on consumption and saving decisions we use data from the British Household Panel Survey and the English Longitudinal Survey of Ageing (ELSA) and we estimate a series of regression models which relate health changes to observed consumption changes. Our findings suggest that there are significant adjustments in the composition of consumption following an illness onset. These adjustments reflect mainly the combined effect of increased costs associated with illness onset as well as the effect of constraints on opportunity to spend associated with illness onset.

Suggested Citation

  • Eleni Karagiannaki, 2009. "The Effect of Health on Consumption Decisions in Later Life: Evidence from the UK," CASE Papers case136, Centre for Analysis of Social Exclusion, LSE.
  • Handle: RePEc:cep:sticas:case136
    as

    Download full text from publisher

    File URL: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper136.pdf
    Download Restriction: no

    More about this item

    Keywords

    health; consumption; wealth;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:sticas:case136. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://sticerd.lse.ac.uk/case/_new/publications/default.asp .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.