Mortality Risk and Consumption by Couples

51 Pages Posted: 9 Jul 1999 Last revised: 5 Apr 2021

See all articles by Michael D. Hurd

Michael D. Hurd

RAND Corporation; State University of New York at Stony Brook - College of Arts and Science - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1999

Abstract

This paper proposes and analyzes a life-cycle model of consumption by couples. The model is considerably more complicated than the standard model for singles because it has to account for the welfare of a surviving spouse. The determinants of consumption are the survival paths of each spouse, bequeathable wealth, the flow of annuities both before and after the death of one of the spouses, a motive for bequeathing at the death of the surviving spouse, and the parameters of the utility functions of the couple and of each spouse if widowed. The analysis shows how consumption and the rate of change of bequeathable wealth react to variations in these determinants, and it compares the consumption level of a single person to a couple. Summaries of wealth change and consumption in panel data are given which offer general support for the life-cycle model.

Suggested Citation

Hurd, Michael D., Mortality Risk and Consumption by Couples (March 1999). NBER Working Paper No. w7048, Available at SSRN: https://ssrn.com/abstract=157769

Michael D. Hurd (Contact Author)

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State University of New York at Stony Brook - College of Arts and Science - Department of Economics ( email )

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