TY - RPRT T1 - Old Age Risks, Consumption, and Insurance Y1 - 2023 A1 - Richard Blundell A1 - Margherita Borella A1 - Jeanne Commault A1 - Mariacristina De Nardi AB - 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. PB - Economic and Social Research Council UR - https://ifs.org.uk/sites/default/files/2023-03/WP202312-Old-age-risks-consumption-and-insurance.pdf ER - TY - RPRT T1 - Why do couples and singles save during retirement? Y1 - 2021 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones A1 - McGee, Rory KW - AHEAD KW - Couples KW - Retirement KW - Savings KW - Singles AB - While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives. JF - NBER Working Paper PB - National Bureau of Economic Research CY - Cambridge, MA ER - TY - RPRT T1 - Medical Spending, Bequests, and Asset Dynamics Around the Time of Death Y1 - 2020 A1 - John Bailey Jones A1 - Mariacristina De Nardi A1 - Eric French A1 - McGee, Rory A1 - Rodgers, Rachel KW - Asset dynamics KW - End of life expenses KW - Medical spending AB - Using data from the Health and Retirement Survey, we document the changes in assets that occur before a person's death. Applying an event study approach, we find that during the 6 years preceding their deaths, the assets of single decedents decline, relative to those of similar single survivors, by an additional $20,000 on average. Over the same time span, the assets of couples who lose a spouse fall, relative to those of similar surviving couples, by an additional $90,000 on average. Households experiencing a death also incur higher out-of-pocket medical spending and other end-of-life expenses. This elevated spending is sufficient to explain (in accounting terms) the asset declines observed for singles but falls short of explaining the declines observed for couples. Bequests from the dying spouse to non-spousal heirs such as children are more than sufficient to explain the remainder. JF - NBER Working Paper Series PB - National Bureau of Economic Research CY - Cambridge, MA UR - http://www.nber.org/papers/w26879 ER - TY - RPRT T1 - Why Does Consumption Fluctuate in Old Age and How Should the Government Insure It? Y1 - 2020 A1 - Richard Blundell A1 - Borella, Margherita A1 - Commault, Jeanne A1 - Mariacristina De Nardi KW - consumption KW - Finance KW - health AB - In old age, consumption can fluctuate because of shocks to available resources and because health shocks affect utility from consumption. We find that even temporary drops in income and health are associated with drops in consumption and most of the effect of temporary drops in health on consumption stems from the reduction in the marginal utility from consumption that they generate. More precisely, after a health shock, richer households adjust their consumption of luxury goods because their utility of consuming them changes. Poorer households, instead, adjust both their necessary and luxury consumption because of changing resources and utility from consumption. JF - NBER Working Paper PB - The National Bureau of Economic Research CY - Cambridge UR - https://www.nber.org/papers/w27348 ER - TY - RPRT T1 - Why Does Consumption Fluctuate in Old Age and How Should the Government Insure it? Y1 - 2020 A1 - Richard Blundell A1 - Commault, Jeanne A1 - Borella, Margherita A1 - Mariacristina De Nardi KW - CAMS KW - health KW - Income AB - In old age, consumption can fluctuate because of shocks to available resources and because health shocks affect utility from consumption. We find that even temporary drops in income and health are associated with drops in consumption and most of the effect of temporary drops in health on consumption stems from the reduction in the marginal utility from consumption that they generate. More precisely, after a health shock, richer households adjust their consumption of luxury goods because their utility of consuming them changes. Poorer households, instead, adjust both their necessary and luxury consumption because of changing resources and utility from consumption. JF - Institute Working Paper PB - Federal Reserve Bank of Minneapolis CY - Minneapolis, MN ER - TY - JOUR T1 - Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply? JF - National Bureau of Economic Research Working Paper Series Y1 - 2019 A1 - Borella, Margherita A1 - Mariacristina De Nardi A1 - Yang, Fang KW - Labor Supply KW - Marriage KW - Social Security Benefits KW - Taxes KW - women AB - In the U.S., both taxes and old age Social Security benefits depend on one's marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments (MSM) on the 1945 and 1955 birth-year cohorts and we use it to evaluate what would happen without these provisions. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. Eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle, reduces the participation of married men after age 55, and increases the savings of couples in both cohorts, including the later one, which has similar participation to that of more recent generations. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population. VL - No. 26097 UR - http://www.nber.org/papers/w26097 N1 - Author contact info:Margherita BorellaUniversità di TorinoDipartimento di Scienze Economico-Socialie Matematico-StatisticheTorino, ItalyE-Mail: margherita.borella@unito.itMariacristina De NardiFederal Reserve Bank of Minneapolis90 Hennepin AveMinneapolis, MN 55401E-Mail: denardim@nber.orgFang YangLouisiana State UniversityDepartment of Economics, 2317Business Education Complex,Nicholson ExtensionBaton Rouge, LA 70803Tel: 225-578-3803E-Mail: fyang@lsu.edu ER - TY - JOUR T1 - The aggregate implications of gender and marriage JF - The Journal of the Economics of Ageing Y1 - 2018 A1 - Borella, Margherita A1 - Mariacristina De Nardi A1 - Yang, Fang KW - Employment and Labor Force KW - Gender Differences KW - Marriage KW - Women and Minorities AB - Wages, labor market participation, hours worked, and savings differ by gender and marital status. In addition, women and married people make up a large fraction of the population and of labor market participants, total hours worked, and total earnings. For the most part, macroeconomists have been ignoring women and marriage in setting up structural models and in calibrating them using data on males only. In this paper, we ask whether ignoring gender and marriage in both models and data implies that the resulting calibration matches well the key economic aggregates. We find that it does not and we ask whether there are other calibration strategies or relatively simple models of marriage that can improve the fit of the model to aggregate data. VL - 11 UR - http://www.sciencedirect.com/science/article/pii/S2212828X16300494 JO - The Journal of the Economics of Ageing ER - TY - RPRT T1 - The Lifetime Medical Spending of Retirees Y1 - 2018 A1 - John Bailey Jones A1 - Mariacristina De Nardi A1 - Eric French A1 - McGee, Rory A1 - Kirschner, Justin KW - Medicaid KW - Medical Expenses KW - Mortality KW - Out-of-pocket payments AB - Using dynamic models of health, mortality, and out-of-pocket medical spending (both inclusive and net of Medicaid payments), we estimate the distribution of lifetime medical spending that retired U.S. households face over the remainder of their lives. We find that at age 70, households will on average incur $122,000 in medical spending, including Medicaid payments, over their remaining lives. At the top tail, 5 percent of households will incur more than $300,000, and 1 percent of households will incur over $600,000 in medical spending inclusive of Medicaid. The level and the dispersion of this spending diminish only slowly with age. Although permanent income, initial health, and initial marital status have large effects on this spending, much of the dispersion in lifetime spending is due to events realized later in life. Medicaid covers the majority of the lifetime costs of the poorest households and significantly reduces their risk JF - NBER Working Paper Series PB - National Bureau of Economic Research CY - Cambridge, MA UR - http://www.nber.org/papers/w24599.pdf ER - TY - RPRT T1 - Marriage-related Policies in an Estimated Life-cycle Model of Households' Labor Supply and Savings for Two Cohorts Y1 - 2017 A1 - Borella, Margherita A1 - Mariacristina De Nardi A1 - Yang, Fang KW - Labor force participation KW - Marriage KW - Models KW - Social Security AB - In the United States, both taxes and old age Social Security benefits explicitly depend on one’s marital status. We study the effects of eliminating these marriage-related provisions on the labor supply and savings of two different cohorts. To do so, we estimate a rich life-cycle model of couples and singles using the method of simulated moments (MSM) on the 1945 and 1955 birth-year cohorts. Our model matches well the life-cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. We find that these marriage-related provisions reduce the participation of married women over their life cycle, the participation of married men after age 55, and the savings of couples. These effects are large for both the 1945 and 1955 cohorts, even though to start with the latter had much higher labor market participation of married women. JF - Working Papers PB - Michigan Retirement Research Center CY - Ann Arbor, MI UR - http://mrrc.isr.umich.edu/wp371/ ER - TY - JOUR T1 - Saving and wealth inequality JF - Review of Economic Dynamics Y1 - 2017 A1 - Mariacristina De Nardi A1 - Fella, Giulio KW - Consumption and Savings KW - Wealth Inequality AB - Why are some people wealth rich while others are poor? To what extent can governments affect inequality? Which instruments should they use? Answering these questions requires understanding why people save. Dynamic quantitative models of wealth inequality can help us to understand and quantify the determinants of the outcomes that we observe in the data and to evaluate the consequences of policy reform. This paper surveys the savings mechanisms generated by the transmission of bequests and human capital, by preference heterogeneity, by rate of return heterogeneity, by entrepreneurship, by richer earnings processes, and by medical expenses. It concludes that the transmission of bequests and human capital, entrepreneurship, and medical-expense risk are crucial determinants of savings and wealth inequality and that we need to look at more data to measure their relative importance. VL - 26 UR - http://www.sciencedirect.com/science/article/pii/S1094202517300546 JO - Review of Economic Dynamics ER - TY - RPRT T1 - The Aggregate Implications of Gender and Marriage Y1 - 2016 A1 - Borella, Margherita A1 - Mariacristina De Nardi A1 - Yang, Fang KW - Gender Differences KW - Marriage KW - Older Adults KW - Retirement Planning and Satisfaction KW - Women and Minorities AB - Wages and life expectancy, as well as labor market outcomes, savings, and consumption, differ by gender and marital status. In this paper we compare the aggregate implications of two dynamic structural models. The first model is a standard, quantitative, life-cycle economy, in which people are only heterogenous by age and realized earnings shocks, and is calibrated using data on men, as typically done. The second model is one in which people are also heterogeneous by gender, marital status, wages, and life expectancy, and is calibrated using data for married and single men and women. We show that the standard life-cycle economy misses important aspects of aggregate savings, labor supply, earnings, and consumption. In contrast, the model with richer heterogeneity by gender, marital status, wage, and life expectancy matches the observed data well. We also show that the effects of changing life expectancy and the gender wage gap depend on marital status and gender, and that it is essential to not only model couples, but also the labor supply response of both men and women in a couple. JF - NBER Working Paper Series PB - National Bureau of Economic Research CY - Cambridge, MA UR - http://www.nber.org/papers/w22817.pdf ER - TY - JOUR T1 - Savings After Retirement: A Survey JF - Annual Review of Economics Y1 - 2016 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones VL - 8 UR - http://www.annualreviews.org/doi/10.1146/annurev-economics-080315-015127 IS - 1 JO - Annu. Rev. Econ. ER - TY - JOUR T1 - Couples' and Singles' Savings after Retirement JF - SSRN Electronic Journal Y1 - 2015 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Marriage KW - Older Adults KW - Retirement Planning and Satisfaction KW - Singles AB - We model the saving problem of retired couples and singles facing uncertain longevity and medical expenses in presence of means-tested social insurance. Households can save to self-insure against uncertain longevity and medical expenses, and to leave bequests. Individuals in a couple can be altruistic towards their spouse and other heirs and split bequests optimally. Single people can care about leaving bequests to children and others. Using AHEAD data, we first estimate the model and we then evaluate the relative importance of the various savings motives and the risk exposure of couples’ versus singles. UR - http://www.ssrn.com/abstract=2664111 JO - SSRN Journal ER - TY - JOUR T1 - How do the risks of living long and facing high medical expenses affect the elderly's saving behavior? JF - Chicago Fed Letter Y1 - 2012 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Adult children KW - Consumption and Savings KW - Health Conditions and Status KW - Net Worth and Assets KW - Retirement Planning and Satisfaction AB - Although the elderly have a lot of wealth, people still do not fully understand their patterns of saving behavior. Many elderly individuals keep large amounts of wealth even as they near the ends of their lives. Furthermore, as one study shows, income-rich households are especially frugal. Among the motivations for saving are the risks of living long and having high medical expenses in old age. In recent research, the authors quantify the importance of forces by estimating and simulating a rich model of saving behavior. Life spans vary greatly in both predictable and unpredictable ways. Using mortality rates estimated from the AHEAD, they find that rich people, women, and healthy people live much longer than their poor, male, and sick counterparts. The risk of living far past one's expected life span is large and, under incomplete annuitization, a potentially important reason why so many elderly people run down their assets so slowly. PB - 294 VL - 294 UR - https://www.chicagofed.org/publications/chicago-fed-letter/2012/january-294 U4 - transfers/saving behavior/wealth/retirement planning/mortality ER - TY - RPRT T1 - Medicaid Insurance in Old Age Y1 - 2012 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Income KW - Medicare/Medicaid/Health Insurance KW - Public Policy AB - Medicaid was primarily designed to protect and insure the poor. However, the poor tend to live much shorter lifespans and thus incur much lower medical expenses before death. In this paper, we assess the insurance and redistributive properties of Medicaid, taking these dimensions of heterogeneity into account for single retirees. The Medicaid recipiency rate for those at the bottom income quintile stays around 60 -70 throughout their retirement. In contrast, Medicaid recipiency by higher-income retirees is much lower but increases by age, especially after age 90. Our preliminary results show that the annuity value of Medicaid payments is a hump-shaped function of permanent income. People in the middle of the income distribution receive more than those at the top or the bottom. Once one takes into account that the rich live longer, Medicaid is even less redistributive: in terms of present discounted value, the richest people receive almost as much the poorest ones, and the middle income people still benefit the most. Accounting for risk makes Medicaid less redistributive further still. Compensating differential calculations show that Medicaid insurance is valued most highly by the most rich, who have the most to lose. JF - MRDRC Research Paper PB - Michigan Retirement and Disability Research Center, University of Michigan CY - Ann Arbor, MI UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2192557 U4 - Medicaid/Redistribution/public policy/poverty ER - TY - RPRT T1 - The Effects of Medicaid and Medicare Reforms on the Elderly s Savings and Medical Expenditures Y1 - 2010 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones A1 - Michigan Retirement Research Center KW - Health Conditions and Status KW - Net Worth and Assets AB - This study explores the relationship between general human capital investment, financial knowledge, occupational spillovers, and the accumulation of wealth in a primarily descriptive manner. Drawing upon human capital theory and following previous related work by Delavande, Rohwedder and Willis (2008), we hypothesized that individuals with daily exposure to financial knowledge through their occupation would benefit by having greater financial knowledge that would translate into greater wealth accumulation than individuals who do not enjoy such spillovers from their occupation. Using data from the Cognitive Economics Study and the Health and Retirement Study, we find strong evidence that individuals in financial occupations tend to have greater financial knowledge and moderate evidence that they also have greater wealth accumulation. JF - Michigan Retirement Research Center Research Working Paper PB - The University of Michigan, Michigan Retirement Research Center CY - Ann Arbor, MI UR - https://mrdrc.isr.umich.edu/pubs/the-effects-of-medicaid-and-medicare-reforms-on-the-elderlys-savings-and-medical-expenditures-2/ U4 - human Capital/financial knowledge/wealth Accumulation/Cognitive Economics Study ER - TY - JOUR T1 - Why Do the Elderly Save? The Role of Medical Expenses JF - The Journal of Political Economy Y1 - 2010 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Consumption and Savings KW - Expectations KW - Healthcare KW - Other KW - Retirement Planning and Satisfaction AB - This paper constructs a model of saving for retired single people that includes heterogeneity in medical expenses and life expectancies, and bequest motives. We estimate the model using Assets and Health Dynamics of the Oldest Old data and the method of simulated moments. Out-of-pocket medical expenses rise quickly with age and permanent income. The risk of living long and requiring expensive medical care is a key driver of saving for many higher-income elderly. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest but also benefit the rich by insuring them against high medical expenses at the ends of their lives. PB - 118 VL - 118 UR - http://proquest.umi.com.proxy.lib.umich.edu/pqdweb?did=2021386431andFmt=7andclientId=17822andRQT=309andVName=PQD IS - 1 U4 - Health care expenditures/Retirees/Single persons/Life expectancy/Savings/Out of pocket costs/Studies ER - TY - RPRT T1 - Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles Y1 - 2006 A1 - Mariacristina De Nardi A1 - Eric French A1 - John Bailey Jones KW - Medical Expenses KW - Mortality KW - Older Adults KW - Savings KW - Singles AB - People have heterogenous life expectancies: women live longer than men, rich people live longer than poor people, and healthy people live longer than sick people. People are also subject to heterogenous out-of-pocket medical expense risk. We construct a rich structural model of saving behavior for retired single households that accounts for this heterogeneity, and we estimate the model using AHEAD data and the method of simulated moments. We find that the risk of living long and facing high medical expenses goes a long way toward explaining the elderly's savings decisions. Specifically, medical expenses that rise quickly with both age and permanent income can explain why the elderly singles, and especially the richest ones, run down their assets so slowly. We also find that social insurance has a big impact on the elderly's savings. PB - National Bureau of Economic Research CY - Cambridge, MA UR - http://www.nber.org/papers/w12554.pdf ER -