We are not all equal: impact of socioeconomic status on old age dependence

We use data from the Survey of Health, Ageing and Retirement in Europe (SHARE) and the Health and Retirement Study (HRS) in the United States to examine how socioeconomic status, proxied by household wealth, affects both the risk and duration of dependency among individuals aged 65 and older. Dependency is defined as the loss of autonomy in performing activities of daily living, marking the onset of long-term care needs. We estimate Cox proportional hazards models and apply a two-stage residual inclusion (2SRI) approach to account for potential endogeneity of wealth. The results show that less wealthy individuals face a significantly higher hazard of becoming dependent, even after controlling for health and demographic characteristics. However, we find little evidence that they experience longer durations of dependency once it occurs. Overall, our findings highlight an additional disadvantage of poverty in old age with less wealthy individuals not only living shorter lives but being also more likely to experience a loss of autonomy before death.