Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations

73 Pages Posted: 8 Jan 2018

Date Written: January 2018

Abstract

Do wealth shocks affect the health of elderly in developed countries? I exploit the booms and busts in the US stock market as a natural experiment that generated considerable gains and losses in the wealth of stock-holding retirees. Using data from the 1998-2011 Health and Retirement Study I construct wealth shocks as the interaction of stock holdings with stock market changes. These wealth shocks predict wealth changes and strongly affect health outcomes. A 10% wealth loss leads to an impairment of 2-3% of a standard deviation in physical health, mental health and survival rates.

Keywords: health, Mortality, Retirees, Stock market, Wealth shocks

JEL Classification: G10, I10, J14

Suggested Citation

Schwandt, Hannes, Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations (January 2018). CEPR Discussion Paper No. DP12562. Available at SSRN: https://ssrn.com/abstract=3098158

Hannes Schwandt (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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