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ERC

Savings and Risks Résumé de rapport

Project ID: 614328
Financé au titre de: FP7-IDEAS-ERC
Pays: United Kingdom

Mid-Term Report Summary - SAVINGS AND RISKS (Savings and Risks Over the Lifecycle: Theory and Evidence)

People save for many reasons, such as to finance their retirement, to leave bequests to others, to start and develop a business, and to self-insure against many risks (earnings, divorce, medical expenses, etc.). An important factor affecting people’s risk exposure, and hence saving behaviour, is the public insurance provided by governments. Risks and insurance influence key economic choices and affect people’s welfare, macroeconomic aggregates, and inequality across people. I explore these questions in four domains.
(i) The effects of means-tested programmes on the savings of single retirees and their medical expenses. In the United States, Medicaid is a means-tested public health insurance programme that covers medical expenses not picked up by other insurance sources. We find that for current single retirees, the Medicaid program may be of the approximately right size. These results are in a paper that has been accepted by the American Economic Review.
(ii) The determinants of household savings for couples during retirement. We find that wealth falls a lot at the death of a spouse, that medical expenses spike up in the period leading to the death of a spouse, and that when the second spouse in a couple dies, there are, in most cases, very few assets left.
(iii) The insurance value of marriage (and cohabitation) over the life cycle. When married, two agents can share risks, live together, and choose the labour supply of each partner and face a set of legal rules that determine the inheritability of social security benefits and joint taxation. This project requires careful modelling of the risks that couples and singles face during the whole life cycle. We find that modeling earnings risks more carefully than done before is essential to understand savings and consumption.
(v) The difference in wealth accumulation between the healthy and unhealthy. At the beginning of retirement, the median wealth of the unhealthy is much lower than the median wealth of the healthy. We find that it necessary to carefully model health dynamics and to allow for chronic health conditions to understand such large discrepancies in wealth accumulation at retirement.

Contact

Jennifer Morgan
Tél.: +44 20 3108 9408
Fax: +44 20 3108 9408
E-mail
Numéro d'enregistrement: 183475 / Dernière mise à jour le: 2016-06-16
Source d'information: SESAM