Uncertain Health and Survival: Effects on End-of-Life Consumption

Lee Lillard and Yoram Weiss

Journal of Business & Economic Statistics, 1997, vol. 15, issue 2, 254-68

Abstract: This paper analyzes the impact of health and survival uncertainty on the saving and consumption decisions of retirees. A dynamic programming approach is used to model the household's planning problem. The utility parameters are estimated using panel data. The authors find that a fall into poor health raises the marginal utility from consumption. Simulations are used to indicate the effects of falling into poor health and loss of spouse. They reveal a large transfer from the health to the sick partner and a strong dependence of saving on the survivor benefits, suggesting that concern about the surviving spouse is an important motive for saving.

Date: 1997
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Working Paper: Uncertain Health and Survival: Efefcts on End-of-Life Consumption (1996)
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