Beyond Income: Health, Wealth, and Racial Welfare Gaps Among Older Americans

We estimate racial disparities in well-being among the older U.S. population using an expected utility framework that incorporates differences
in consumption, leisure, health, mortality, and wealth. We find large racial
disparities in expected welfare later in life. Moreover, disparity measures
based on cross-sectional consumption substantially underestimate racial
welfare gaps by ignoring disparities in expected elderly health, wealth,
and mortality. Our decomposition exercises show that a majority of the
estimated welfare gaps are determined by age sixty initial conditions as
opposed to racial differences in dynamic processes after age sixty. This
suggests that policies aimed at closing racial gaps in late-life may be more
successful and efficient if targeted earlier in the life-cycle. In other words,
outside of direct wealth transfers, it may largely be too late to target such
interventions directly at older populations.