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The Asset Cost of Poor health

Author

Listed:
  • James M. Poterba
  • Steven F. Venti
  • David A. Wise

Abstract

This paper examines the correlation between poor health and asset accumulation for households in the first nine waves of the Health and Retirement Survey. Rather than enumerating the specific costs of poor health, such as out of pocket medical expenses or lost earnings, we estimate how the evolution of household assets is related to poor health. We construct a simple measure of health status based on the first principal component of HRS survey responses on self-reported health status, diagnoses, ADLs, IADL, and other indicators of underlying health. Our estimates suggest large and substantively important correlations between poor health and asset accumulation. We compare persons in each 1992 asset quintile who were in the top third of the 1992 distribution of latent health with those in the same 1992 asset quintile who were in the bottom third of the latent health distribution. By 2008, those in the top third of the health distribution had accumulated, on average, more than 50 percent more assets than those in the bottom third of the health distribution. This "asset cost of poor health" appears to be larger for persons with substantial 1992 asset balances than for those with lower balances.

Suggested Citation

  • James M. Poterba & Steven F. Venti & David A. Wise, 2010. "The Asset Cost of Poor health," NBER Working Papers 16389, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16389
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    References listed on IDEAS

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    1. Samuel Marshall & Kathleen McGarry & Jonathan S. Skinner, 2011. "The Risk of Out-of-Pocket Health Care Expenditure at the End of Life," NBER Chapters,in: Explorations in the Economics of Aging, pages 101-128 National Bureau of Economic Research, Inc.
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    15. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets," NBER Chapters,in: Explorations in the Economics of Aging, pages 23-69 National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Luc Behaghel & Didier Blanchet & Muriel Roger, 2014. "Retirement, Early Retirement, and Disability: Explaining Labor Force Participation after Fifty-Five in France," NBER Chapters,in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 251-284 National Bureau of Economic Research, Inc.
    2. Svetlana Pashchenko & Ponpoje (Poe) Porapakkarm & Mariacristina De Nardi, 2017. "The Lifetime Costs of Bad Health," 2017 Meeting Papers 533, Society for Economic Dynamics.
    3. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    4. Maria Prados, 2012. "A Life Cycle Approach to the Mechanism Connecting Health Inequality and Earnings Inequality," 2012 Meeting Papers 1145, Society for Economic Dynamics.
    5. Margherita Borella & Mariacristina De Nardi & Eric French, 2016. "Who Receives Medicaid in Old Age? Rules and Reality," NBER Working Papers 21873, National Bureau of Economic Research, Inc.
    6. Wise, David Alsgaard & Poterba, James M. & Venti, Steven F., 2011. "The Drawdown of Personal Retirement Assets," Scholarly Articles 4677548, Harvard Kennedy School of Government.
    7. Hendrik Jürges & Lars Thiel & Tabea Bucher-Koenen & Johannes Rausch & Morten Schuth & Axel Börsch-Supan, 2014. "Health, Financial Incentives, and Early Retirement: Microsimulation Evidence for Germany," NBER Chapters,in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 285-330 National Bureau of Economic Research, Inc.
    8. James M. Poterba & Steven F. Venti & David A. Wise, 2013. "The Nexus of Social Security Benefits, Health, and Wealth at Death," NBER Chapters,in: Discoveries in the Economics of Aging, pages 159-182 National Bureau of Economic Research, Inc.
    9. James Poterba & Steven Venti & David A. Wise, 2013. "Health, Education, and the Postretirement Evolution of Household Assets," Journal of Human Capital, University of Chicago Press, vol. 7(4), pages 297-339.
    10. Alain Jousten & Mathieu Lefebvre & Sergio Perelman, 2014. "Health Status, Disability, and Retirement Incentives in Belgium," NBER Chapters,in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 179-209 National Bureau of Economic Research, Inc.
    11. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts," NBER Chapters,in: Investigations in the Economics of Aging, pages 21-69 National Bureau of Economic Research, Inc.
    12. James M. Poterba & Steven F. Venti & David A. Wise, 2015. "What Determines End-of-Life Assets? A Retrospective View," NBER Chapters,in: Insights in the Economics of Aging, pages 127-157 National Bureau of Economic Research, Inc.
    13. repec:eee:jobuve:v:4:y:2015:i:c:p:22-29 is not listed on IDEAS
    14. Luc Behaghel & Didier Blanchet & Muriel Roger, 2014. "Retirement, Early Retirement, and Disability: Explaining Labor Force Participation after Fifty-Five in France," NBER Chapters,in: Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement, pages 251-284 National Bureau of Economic Research, Inc.
    15. Yilmazer, Tansel & Babiarz, Patryk & Liu, Fen, 2015. "The impact of diminished housing wealth on health in the United States: Evidence from the Great Recession," Social Science & Medicine, Elsevier, vol. 130(C), pages 234-241.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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