Old Age Risks, Consumption, and Insurance

Richard Blundell (), Margherita Borella, Jeanne Commault and Mariacristina De Nardi

American Economic Review, 2024, vol. 114, issue 2, 575-613

Abstract: In the United States, after age 65, households face income and health risks, and a large fraction of these risks are transitory. While consumption significantly responds to transitory income shocks, out-of-pocket medical expenses do not. In contrast, both consumption and out-of-pocket medical expenses respond to transitory health shocks. Thus, most US elderly keep their out-of-pocket medical expenses close to a satiation point that varies with health. Consumption responds to health shocks mostly because adverse health shocks reduce the marginal utility of consumption. The effect of health on marginal utility changes the optimal transfers due to health shocks.

JEL-codes: D12 E21 G22 G51 I10 J14 J26 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Old Age Risks, Consumption, and Insurance (2023)
Working Paper: Old age risks, consumption, and insurance (2023)
Working Paper: Old Age Risks, Consumption, and Insurance (2020)
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DOI: 10.1257/aer.20220555

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