The Impact of Health Insurance on Stockholding: A Regression Discontinuity Approach
48 Pages Posted: 9 Nov 2014 Last revised: 7 Oct 2019
Date Written: January 29, 2017
Economic theory predicts that a reduction in background risk should induce financial risk-taking, particularly for individuals with low stock market participation costs. Hence, health insurance coverage could affect financial risk-taking by offsetting health-related background risk. We use a regression discontinuity design to examine whether Medicare eligibility at age 65 increases stockholding in the US, and find that it does so for those with college education, but not for their less-educated counterparts who face higher stock market participation costs. Our results are unlikely due to the reduction of medical expenses associated with Medicare coverage because the latter does not affect bondholding.
Keywords: Health Insurance, Medicare, Stockholding, Regression Discontinuity, Household Finance
JEL Classification: D14, I13, G11
Suggested Citation: Suggested Citation