Aggregate Risk-Taking and Declining Mortality

TitleAggregate Risk-Taking and Declining Mortality
Publication TypeReport
Year of Publication2002
AuthorsEdwards, RD
InstitutionUniversity of California at Berkeley, Dept. of Economics
KeywordsHealth Conditions and Status, Net Worth and Assets, Public Policy
Abstract

Just as health and wealth are related, so too are health and financial risk-taking. Although directions of causality are unclear, healthier people are wealthier and take more financial risks. Dierential mortality is therefore a source of bias in cross-sectional measures of portfolio choice through age. As declines in mortality increase lifespans, poorer and previously sicker individuals will increase their share of the surviving population. It follows that the aggregate equity share in the economy may be pulled lower, all other things equal. Panel data from the Health and Retirement Study confirm these insights. Mortality-adjusted age proles of portfolio shares rose less quickly during the 1990s than their unadjusted cross-sectional counterparts. One implication of a declining aggregate equity share due to aging is that public pension programs may need to be recongured over time in order to address the changing characteristics of surviving pensioners. Phasing in a partial privatization of Social Security would be one such option.

Notes

National Institute for Aging

URLhttp://www.demog.berkeley.edu/ redwards/edwards-mortbias.pdf
Endnote Keywords

financial risk taking/Wealth/Health

Endnote ID

10842

Citation Key5515