Leader: Margherita Borella (UNIVE/UNITO); Other collaborator(s): Emilia di Lorenzo (UNINA)
Provide an “integrated model” of saving for retirement, taking into account health and income risks over the life course, a portfolio of welfare provisions and private saving, and the effects that health shocks might have on consumption. Provide parsimonious representations of health, and model the dynamics and inequality of health and income outcomes and their consequences on life cycle savings and retirement.
Brief description of the activities and of the intermediate results:
Completed research on the study of consumption decisions of senior citizens in response to health and income shocks. Understand the channels through which health shocks affect consumption in old age (change in utility and/or change in resources). Ongoing Research is use Surveys on consumption, health and income at older ages to construct synthetic health indexes and to estimate and better disentangle impact of health and income shocks on consumption choices. In particular, we construct and study a measure health that has been proposed by the medical literature. The frailty index (or frailty) tracks health deterioration by considering that, as people age, they accumulate more ``health deficits," such as difficulties with activities of daily living and medical diagnoses. Frailty is defined as the fraction of deficits present for an individual at a certain age over the total number of deficits considered
Main policy, industrial and scientific implications
Examine the qualitative implications in terms of optimal insurance for temporary shocks. While shocks to resources result in less resources in some states than in others, shocks to marginal utility (via health) generate a mismatch between resources and the ability to take advantage of resources across states. That is, people might end up with a relatively large amount of resources while they are in bad health and have low marginal utility of consumption, or low resources while they are in good health and have high marginal utility of consumption. Insuring households against income shocks would require to allocates the same level of consumption and medical expenses to all, insuring households against marginal utility shocks allocates more medical expenses to households experiencing an increase in their marginal utility of medical expenses and more consumption to households who do not experience a reduction in their marginal utility of consumption.
Brief description of the activities and of the intermediate results:
1. Focus on the design of policies and benefit provisions for old age. Preliminary estimates, based on individual-level data, show that inadequate local services push families to buy care, reducing family income and worsening poverty among low-income seniors.
2. "Integrated welfare" studies look at the welfare value of pension contracts that take account of the situation of couples. This requires computing and forecasting longevity improvements and mortality dependence within couples.
3. "Saving for Retirement" research looks at economic shocks and shows that effective insurance for old age should cover consumption expenditures, but also exceptional medical expenses.
Brief description of the activities and of the intermediate results:
Study consumption decisions of senior citizens in response to health and income shocks. Understand the channels through which health shocks affect consumption in old age (change in utility and/or change in resources).
The team is looking at how health risks in old age and bequest motives drive the labor supply of couples and singles over the life cycle. Labor supply and savings over the life cycle are influenced by risks that change over the life cycle. During the working stage, individuals face earning risk and couple formation/dissolution, while during the retirement stage health and longevity risk, as well as the risk of death of a partner, become prevalent. In addition, there is the possibilities to leave bequests at the death of the last survivor and at the death of the first spouse (side bequests). Our work investigates to what extent old-age risks and bequest motives drive the labor supply behavior and savings of singles and couples over the whole life cycle.
We also study which health measures are better suited to study health inequality across different socio-demographic groups. Using data from the U.S. Health and Retirement Study and from the European SHARE, we construct robust and comparable health measures to study inequality in health.
In particular, we plan to compare the predictive performance of two health measures: Self-Reported Health Status (SRHS) and frailty. SRHS, commonly used in economic studies, relies on individuals rating their health as excellent, very good, good, fair, or poor. In contrast, frailty, originating from the medical literature, quantifies health deficits, encompassing physical and mental impairments and medical diagnoses, thereby serving as a measure of biological age.
Brief description of the activities and of the intermediate results:
We study how large is health inequality in middle age, and how does it shape subsequent economic disparities by race, ethnicity, and gender.
Main policy, industrial and scientific implications
Our findings suggest that targeted earlier health interventions for minorities could significantly narrow economic and quality-of-life inequalities in middle and old age.
Dissemination Events:
Scientific Outputs: