Old Age Risks, Consumption, and Insurance

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

No 18047, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In the U.S, 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 U.S. 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.

Keywords: Consumption; insurance (search for similar items in EconPapers)
JEL-codes: D12 D15 E21 H31 I13 (search for similar items in EconPapers)
Date: 2023-03
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Related works:
Journal Article: Old Age Risks, Consumption, and Insurance (2024)
Working Paper: Old age risks, consumption, and insurance (2023)
Working Paper: Old Age Risks, Consumption, and Insurance (2020)
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