Do wealth shocks matter for the life satisfaction of the elderly? Evidence from the health and retirement study

Marco Cozzi and Qiushan Li ()
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Qiushan Li: University of Calgary

Economics Bulletin, 2024, vol. 44, issue 1, 88 - 98

Abstract: We study the importance of wealth shocks as a determinant of life satisfaction for the elderly and near-elderly. With data from the U.S. Health and Retirement Study, we specify an econometric analysis exploiting the 2008-09 financial crisis as a source of exogenous variation in wealth, caused by a long-lasting decrease in asset prices. Although absolute changes in wealth are not found to systematically affect individual well-being, losing 60% or more of the pre-crisis wealth negatively impacted measures of life satisfaction. The results are shown to hold also in a number of robustness checks. The financial crisis wealth shock is found to have a persistent detrimental effect on the well-being of the American elderly. Finally, we argue that the simultaneity bias arising from neglecting the endogeneity of wealth accumulation can be substantial.

Keywords: Wealth; Uninsurable shocks; Life Satisfaction; Subjective Well-Being (search for similar items in EconPapers)
JEL-codes: D1 I3 (search for similar items in EconPapers)
Date: 2024-03-30
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