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A structural analysis of the health expenditures and portfolio choices of retired agents

  • Julien Hugonnier

    (Ecole Polytechnique Fédérale de Lausanne and Swiss Finance Institute)

  • Florian Pelgrin

    (University of Lausanne and CIRANO)

  • Pascal St-Amour

    (University of Lausanne, Swiss Finance Institute, CIRANO and CIRPEE)

Richer and healthier agents tend to hold riskier portfolios and spend proportionally less on health expenditures. Potential explanations include health and wealth effects on preferences, expected longevity or disposable total wealth. Using HRS data, we perform a structural estimation of a dynamic model of consumption, portfolio and health expenditure choices with recursive utility, as well as health-dependent income and mortality risk. Our estimates of the deep parameters highlight the importance of health capital, mortality risk control, convex health and mortality adjustment costs and binding liquidity constraints to rationalize the stylized facts. They also provide new perspectives on expected longevity and on the values of life and health.

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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 10-29.

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Length: 47 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:chf:rpseri:rp1029
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