Health Heterogeneity, Portfolio Choice and Wealth Inequality

Juergen Jung and Chung Tran

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: This paper documents empirical evidence on the long-lasting effects of poor health on stock market participation, asset portfolio composition, and the wealth gap over the lifecycle in the U.S. To quantify the significance of this health-wealth portfolio channel, we formulate a structural lifecycle model that incorporates elastic labor supply, asset portfolio choice, and household heterogeneity in health status, health expenditure, health insurance, and earnings ability. Through counterfactual simulations, we demonstrate that the health-wealth portfolio channel plays a significant role in explaining variations in wealth gaps across groups and over the lifecycle. Finally, our findings highlight the importance of the health insurance system in mitigating wealth inequality in the US.

Keywords: Health and income risks; Health insurance; Heterogeneity; Lifecycle savings; Risky and safe assets; Asset portfolio; Inequality. (search for similar items in EconPapers)
JEL-codes: E21 G41 G51 G52 H21 I13 I14 (search for similar items in EconPapers)
Date: 2024-11
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2024-702

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