Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles

45 Pages Posted: 13 Dec 2005

See all articles by Eric French

Eric French

Department of Economics; Institute for Fiscal Studies (IFS)

Mariacristina De Nardi

University College London, Economics Dpt.; Federal Reserve Bank of Chicago; National Bureau of Economic Research (NBER) - Public Economics

John Bailey Jones

Federal Reserve Bank of Richmond; SUNY at Albany - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 2005

Abstract

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 show that all of these dimensions of heterogeneity are large for the elderly. Can these factors explain their lack of asset decumulation even at very advanced ages and the high saving rate of the income-rich elderly? We answer this question in two steps. We first estimate the uncertainty about mortality and out of pocket medical expenditures as functions of sex, health, permanent income, and age. We then formalize a rich structural model of saving behavior for retired single households, and we estimate it by using the method of simulated moments.

Keywords: Savings, Elderly, differential mortality, health risk

JEL Classification: D10, E21

Suggested Citation

French, Eric and De Nardi, Mariacristina and Jones, John B., Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles (December 2005). FRB of Chicago Working Paper No. 2005-13, Available at SSRN: https://ssrn.com/abstract=869436 or http://dx.doi.org/10.2139/ssrn.869436

Eric French (Contact Author)

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Mariacristina De Nardi

University College London, Economics Dpt. ( email )

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John B. Jones

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