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More to Live for: Health Investment Responses to Expected Retirement Wealth in Chile

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  • Miller, Grant
  • Valdés, Nieves
  • Vera-Hernández, Marcos

Abstract

A poorly understood but important way that economic conditions influence health is through the incentives that they create for health investments. In this paper, we study how individuals’ current health investments respond to changes in expected future wealth, focusing on Chile’s 1981 public pension. We compile detailed administrative pension data linked to a rich household panel survey, and we then exploit discrete breaks in the reform’s impact on expected pension wealth across cohorts of Chileans using a fuzzy regression kink design to estimate how health behavior, preventive health care use, and chronic disease diagnoses respond to changes in expected pension wealth. Consistent with theoretical predictions, we find that greater expected pension wealth increases the use of medical services –and in turn, the detection of chronic diseases. More generally, our results provide new empirical evidence of forward-looking behavior consistent with the life-cycle and permanent income hypotheses.

Suggested Citation

  • Miller, Grant & Valdés, Nieves & Vera-Hernández, Marcos, 2019. "More to Live for: Health Investment Responses to Expected Retirement Wealth in Chile," Research Department working papers 1517, CAF Development Bank Of Latinamerica.
    • Handle: RePEc:dbl:dblwop:1517
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    Keywords

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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