A structural analysis of the health expenditures and portfolio choices of retired agents

Julien Hugonnier, Florian Pelgrin and Pascal St-Amour
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Florian Pelgrin: University of Lausanne and CIRANO

No 10-29, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Richer and healthier agents tend to hold riskier portfolios and spend proportionally less on health expenditures. Potential explanations include health and wealth effects on preferences, expected longevity or disposable total wealth. Using HRS data, we perform a structural estimation of a dynamic model of consumption, portfolio and health expenditure choices with recursive utility, as well as health-dependent income and mortality risk. Our estimates of the deep parameters highlight the importance of health capital, mortality risk control, convex health and mortality adjustment costs and binding liquidity constraints to rationalize the stylized facts. They also provide new perspectives on expected longevity and on the values of life and health.

Keywords: Asset allocation; Expected lifetime; Health production function; Mortality risk; Recursive utility; Value of health; Value of life (search for similar items in EconPapers)
JEL-codes: G11 I12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-06
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1029

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