Wealth Trajectories Across Key Milestones: Longitudinal Evidence from Life-Course Transitions

Gopi Goda and Jialu Liu Streeter

No 28329, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Wealth varies considerably across the population and changes significantly over the lifecycle. In this paper, we trace out trajectories of wealth across several key life milestones, including marriage, homeownership, childbirth, divorce, disability, health shocks, retirement and widowhood using multiple decades of longitudinal panel data. We estimate both changes over the ten-year period before and after each milestone and assess whether those changes occur gradually or sharply after the milestone. We find evidence of significant long-run increases in wealth associated with homeownership and retirement, and significant long-run reductions in wealth associated with divorce, health shocks, and disability. In general, these changes appear to occur gradually rather than immediately after the milestone. Our results also indicate a large degree of heterogeneity across demographics, socioeconomic status and risk protection from insurance. In particular, those with lower levels of socioeconomic status and those without access to risk protection experience smaller wealth gains (or larger wealth losses) following life-course transitions. These results identify populations and life stages where individuals are most vulnerable to large reductions in wealth.

JEL-codes: G51 I13 J1 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-age, nep-hea and nep-ias
Note: AG EH LS PE
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