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Household Portfolio Choices, Health status and Health Care Systems A Cross-Country Analysis Based on SHARE

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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 System that could reduce households’ probability of incurring current and future out-of-pocket medical expenditures. In this paper, we first sketch a theoretical framework in which household portfolio decisions are a function of both individual and systemic characteristics. Then, we test its main implications based on SHARE data, studying the influence of current health status and future health risk on the decision to hold risky assets, across 10 European countries with different health care systems, each offering a different degree of protection against out-of-pocket medical expenditures. We find robust empirical confirmation of our model implications, since perceived health condition matters more than objective health condition and, consistent with the theoretical underpinnings of background risk, health risk affects portfolio choices only in countries with less protective healthcare systems. Furthermore, portfolio decisions consistent with background risk models are observed only with respect to middle-aged and highlyeducated investors.

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  • Vincenzo Atella & Marianna Brunetti & Nicole Maestas, 2011. "Household Portfolio Choices, Health status and Health Care Systems A Cross-Country Analysis Based on SHARE," CEIS Research Paper 183, Tor Vergata University, CEIS, revised 21 Jan 2011.
  • Handle: RePEc:rtv:ceisrp:183
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    Cited by:

    1. 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.
    2. Koch, Alexander K. & Nafziger, Julia, 2016. "Goals and bracketing under mental accounting," Journal of Economic Theory, Elsevier, vol. 162(C), pages 305-351.
    3. 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.
    4. 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.
    5. repec:kap:rqfnac:v:49:y:2017:i:1:d:10.1007_s11156-016-0589-6 is not listed on IDEAS
    6. repec:eee:hapoch:v1_993 is not listed on IDEAS

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    Keywords

    Household portfolios; health status; national health care systems;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets

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