Effects of Health Care Policy Uncertainty on Households' Portfolio Choice

72 Pages Posted: 17 Jan 2022 Last revised: 3 May 2023

See all articles by Thomas T. Wiemann

Thomas T. Wiemann

University of Chicago - Department of Economics

Robin L. Lumsdaine

American University - Department of Finance and Real Estate; Erasmus University Rotterdam (EUR) - Department of Econometrics; National Bureau of Economic Research (NBER); Tinbergen Institute

Date Written: January 3, 2022

Abstract

This paper develops a nonparametric identification approach for causal effects of an endogenous macroeconomic variable on microeconomic outcomes. The key assumption is the existence of an exogenous variable that shifts responsiveness to the variable of interest without shifting responsiveness to other macroeconomic time series. We apply the approach to study the effect of health care policy uncertainty (HCPU) on households’ portfolio choice using health shocks to capture cross-sectional heterogeneity. Under the additional assumption of risk averse agents, our approach provides an informative bound on the average causal effect of HCPU. The empirical results highlight HCPU as an important determinant of households’ financial behavior, and showcase substantial heterogeneity in HCPU effects across varying unexpected changes to health.

Keywords: Causal Inference, Partial Identification, Heterogeneous Effects, Health and Retirement Study (HRS), Household Finance

JEL Classification: D14, D80, I18, C21, C14

Suggested Citation

Wiemann, Thomas T. and Lumsdaine, Robin L., Effects of Health Care Policy Uncertainty on Households' Portfolio Choice (January 3, 2022). Available at SSRN: https://ssrn.com/abstract=4011170 or http://dx.doi.org/10.2139/ssrn.4011170

Thomas T. Wiemann (Contact Author)

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Robin L. Lumsdaine

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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