Health accidents and wealth decline in old age

Hippolyte D’albis (), Najat El Mekkaoui () and Bérangère Legendre
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Hippolyte D’albis: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Bérangère Legendre: IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc
Authors registered in the RePEc Author Service: Hippolyte d'Albis

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper explores the impact of a health shock and changes in survival probability on the savings and portfolio choices of older individuals. Using a theoretical framework featuring a portfolio choice that incorporates imperfect annuity markets, we analyse how elderly individuals, whose survival probability has been altered by a health shock, allocate their resources.A difference-in-differences approach complements the theoretical approach by taking into account the effect of age and cohort, and controlling for selection bias related to health events at older ages. Our analysis utilizes a panel of 5570 observations from the Survey of Health, Aging, and Retirement in Europe (Shavelle et al., 2019;2017). Both theoretical and empirical findings converge, indicating that experiencing a health accident such as a stroke or heart attack leads to a decrease in safe savings. Consequently, investing in annuities becomes crucial in enabling individuals to mitigate the consequences of poor health in aging economies.

Keywords: Life cycle model; Saving behavior; Health shock; Difference-in-differences (search for similar items in EconPapers)
Date: 2023
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Published in Social Science & Medicine, 2023, 332, pp.116117. ⟨10.1016/j.socscimed.2023.116117⟩

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Journal Article: Health accidents and wealth decline in old age (2023)
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Working Paper: Health accidents and wealth decline in old age (2023)
Working Paper: Health accidents and wealth decline in old age (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-04425729

DOI: 10.1016/j.socscimed.2023.116117

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