Download or read book Medical Expenditure Risk and Household Portfolio Choice written by Dana Goldman and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. We measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. We account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. We find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Given that just 50 percent of our sample holds risky assets, these are economically sizable effects. It also suggests an important link between the availability and pricing of health insurance and the financial behavior of the elderly.

Download or read book Medical Expenditure Risk and Household Portfolio Choice written by Dana P. Goldman and published by . This book was released on 2009 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. We measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. We account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. We find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Given that just 50 percent of our sample holds risky assets, these are economically sizable effects. It also suggests an important link between the availability and pricing of health insurance and the financial behavior of the elderly.

Download or read book Medical Expenditure Risk and Household Portfolio Choice written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. The authors measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. They account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. They find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Their results point to an important link between the availability and pricing of health insurance and the financial behavior of the elderly.

Download or read book Medical Expenditure and Household Portfolio Choice written by Dana Paul Goldman and published by . This book was released on 2005 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Household Portfolio Choice written by Tae-Young Pak and published by . This book was released on 2016 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation considers household portfolio choice at the end of life-cycle. Three essays examine the importance of uncertainty about medical expenditure risk, cognitive aging, and subjective life horizon, and their role in explaining late-life savings decisions and portfolio allocation. Chapter 2 of the dissertation, entitled "Medical expenditure risk and precautionary saving: Evidence from Medicare Part D", tests the presence of precautionary saving motive to cope with medical expenditure risk. By examining Medicare Part D and it's association with household saving, I demonstrate that social insurance programs discourage private saving by reducing health-related uncertainty. Chapter 3 of the dissertation, entitled "Econometric analysis of cognitive abilities and portfolio choice", explores the role of cognitive aging in explaining a portfolio rebalancing towards safer assets at the end of life-cycle. In this essay, I argue that a gradual decrease in risky asset ownership at the end of life-cycle is in part driven by losing cognitive capabilities. I pay particular attention to testing whether such association is observed only on the extensive margin - that is, changes in ownership, or both risky asset ownership and reallocation across the intensive margin are affected. Causality is tested by exploiting exogenous variation in cognitive health, created by the introduction of Medicare Part D in 2006. Chapter 4 of the dissertation, entitled "Subjective life expectancy and portfolio choice: A household bargaining approach", examines collective decision-making when spouses have an incentive to bargain over portfolio allocation. This article starts with two well-known facts: (a) difference in life expectancy between husband and wife; and (b) age disparity in marriage. These two facts imply that females, on average, face 5 or 6 years longer retirement period to finance, and thus have more incentive to hold risky assets to achieve higher expected capital gains in the long-term. A difference in life expectancy then creates an incentive to bargain over how to allocate savings to risky and non-risky assets. The estimation results indeed show that more financial wealth is allocated to risky assets when a spouse with longer life expectancy has the "final say."

Download or read book Portfolio Allocation with Medical Expenditure Risk A Life Cycle Model and Machine Learning Analysis written by You Du and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores how the medical expenditure risk affects the households' portfolio choice across health status theoretically in a life cycle model and empirically using machine learning methods. Medical expenditure risk, as a background risk, can relocate households' financial decisions. A higher medical expenditure risk leads to a larger fluctuation and more uncertainty in households' consumption and therefore, utility. As a result, risk-free assets become more preferable. Our machine learning analysis shows evidence consistent with the theoretical life cycle model predictions. In particular, households with better health status tend to hold more stocks and conditional on being in good health status, households are willing to invest more in safe assets if they face a higher medical expenditure risk.

Download or read book How Elderly Households Allocate Their Assets written by Zhong Jin and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the relationship between portfolio allocation decisions and out-of-pocket healthcare expenses of elderly U.S. households. More specifically, it analyzes the impact of increasing healthcare costs on households' assets allocation decisions between 1992 and 2006. Controlling for heterogeneity in intra-household risk preferences, I also examine if the heterogeneous individual risk preferences influence how households collectively make portfolio allocation decisions responding to health risks. Empirical results show that the volatility of the medical expense reduces the investment in risky financial assets. Out-of-pocket medical expenses, after controlling for the wealth and under the constraint of shares of all assets adding to one, increase a household's share of risky financial assets. Heterogeneity in intra-household risk preferences does not significantly impact how households make portfolio allocation decisions among financial assets.

Download or read book ESSAYS ON PORTFOLIO CHOICE AND HEALTH OVER THE LIFE CYCLE written by You Du and published by . This book was released on 2021 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the effect of health and its associated variables on households' consumption and portfolio choices over life cycle. The first two essays constitute my job market paper, which explains why the risky portfolio share rises in wealth from two health mechanisms: endogenous health investment and medical expenditure risk. The third chapter explores the effect of health and health risk on households' optimal consumption and portfolio decisions over life cycle. Chapter 1 titled ``PORTFOLIO CHOICE AND HEALTH ACROSS WEALTH: EMPIRICAL EVIDENCE" illustrates the empirical relationship between the portfolio puzzle and the heterogeneity of health variables across wealth. Classic financial theory suggests that under the assumption of no borrowing constraints and no mean-reverting stock returns, households should hold a constant risky portfolio in spite of their wealth, ages and life horizons (Samuelson (1969) and Merton (1969, 1971)). Yet data from the Survey of Consumers Finances (SCF) show that the risky portfolio share of financial assets increases in wealth. In the literature, this is called the ``portfolio puzzle". Meanwhile, various sources of data indicate that, compared with the non-wealthy households, the wealthy people have better health, longer life horizon, higher out of pocket medical spending with lower uncertainty, and more health care time. All these facts suggest a novel correlation between the portfolio puzzle and the heterogeneity of health variables across wealth and provide a robust empirical foundation to explain the portfolio puzzle from a health perspective. In Chapter 2 titled ``A LIFE CYCLE MODEL OF PORTFOLIO CHOICE AND HEALTH", a life cycle model with endogenous health investment and medical expenditure risk is proposed to capture the key empirical features in the first chapter. This calibrated model remarkably matches the U.S. data. I find that endogenous health investment is essential to explain the portfolio puzzle: if health is exogenous without investment, the model can only could deliver 7.2% of the risky share gap across wealth. Medical expenditure risk is less important and has a larger effect on the non-wealthy group. If I abstract from medical expenditure risk, the risky shares increase for both groups: 24% for the low wealth group and 5% for the wealthy group. This life cycle model provides new insights into how health affects households' financial behavior. Chapter 3 titled ``OPTIMAL CONSUMPTION AND PORTFOLIO CHOICE WITH HEALTH RISK" investigates the effect of health and health risk on households' optimal consumption and portfolio allocations over the life cycle. The simulation results show that consumption, savings in bonds, and savings in stocks all increase with health. The risky portfolio share, which is the ratio of savings in stocks to the total financial assets, demonstrates the same tendency for both health states over the life cycle: at the very young age, the risky portfolio share is relatively high. Starting from the middle age, this share falls significantly and keeps steady until the end of life. For most of the lifetime, the risky portfolio share is positively related with health. These results emphasize the importance of health and its associated risk in consumption and portfolio decisions.

Download or read book Public Health Insurance and Household Portfolio Choices written by Marco Angrisani and published by . This book was released on 2017 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Large, unpredictable and not fully insurable health-care costs represent a source of background risk that might deter households' financial risk taking. Using panel data from the Health and Retirement Study and fixed-effects estimation, we test whether universal health insurance, like Medicare for over-65 Americans, shields against this risk promoting stockholding. Households in poor health, who face a higher risk of medical expenses, are less likely to hold stocks than their healthier counterparts. Yet, this gap is mostly eliminated by Medicare eligibility. Notably, the offsetting is primarily experienced by households without private health insurance over the observation period.

Download or read book Household Portfolio Choices Health Status and Health Care Systems a Cross Country Analysis Based on Share written by Vincenzo Atella and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Health risk is increasingly viewed as an important form of background risk that affects household portfolio decisions. However, its role might be mediated by the presence of a protective full-coverage National Health System that could reduce households' probability of incurring current and future out-of-pocket medical expenditures. In this paper, we first sketch a theoretical framework in which household portfolio decisions are a function of both individual and systemic characteristics. Then, we test its main implications based on SHARE data, studying the influence of current health status and future health risk on the decision to hold risky assets, across 10 European countries with different health care systems, each offering a different degree of protection against out-of-pocket medical expenditures. We find robust empirical confirmation of our model implications, since perceived health condition matters more than objective health condition and, consistent with the theoretical underpinnings of background risk, health risk affects portfolio choices only in countries with less protective healthcare systems. Furthermore, portfolio decisions consistent with background risk models are observed only with respect to middle-aged and highly educated investors.

Download or read book Does Health Affect Portfolio Choice written by David A. Love and published by . This book was released on 2007 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Portfolio Choice and Health Status written by Harvey S. Rosen and published by . This book was released on 2003 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the role that health status plays in household portfolio decisions using data from the Health and Retirement Study. The results indicate that health is a significant predictor of both the probability of owning different types of financial assets and the share of financial wealth held in each asset category. Households in poor health are less likely to hold risky financial assets, other things (including the level of total wealth) being the same. Poor health is associated with a smaller share of financial wealth held in risky assets and a larger share in safe assets. We find no evidence that the relationship between health status and portfolio allocation is driven by third variables' that simultaneously affect health and financial decisions. Further, the relationship between health status and portfolio choice does not appear to operate through the effect of poor health on individuals' attitudes toward risk, their planning horizons, or their health insurance status

Download or read book Recalibrating Retirement Spending and Saving written by John Ameriks and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: As Baby Boomers make the transition into their 60s, they have focused policymakers and the media's attention onto how this generation will manage the retirement phase of its lifetime. This volume acknowledges that many, though not all, in this older cohort have accumulated substantial assets, so for them, the question is what will they do with what they have? We offer a detailed exploration of how people entering retirement will deploy their accumulated assets in the near and long term, so to best meet their myriad spending, investment, and other objectives. The book offers readers an invaluable study of emerging issues regarding assets and expectations on the verge of retirement, including uncertainty regarding life expectancy and morbidity. It is composed of chapters from a distinguished set of authors including a Nobel Laureate and a wonderful mix of academics and practitioners from the legal, financial, and economic fields. This volume represents an invaluable addition to the Pension Research Council / Oxford University Press series. It will be especially useful for analysts and consumers concerned with ways to position, invest, manage, and spend retirement assets; financial advisers and academics debating ways to effectively manage assets in retirement; and lawyers and policy experts evaluating regulation for the retirement payout marketplace.

Download or read book The Household Finance Issues in China written by Sibo Zhao and published by Springer Nature. This book was released on with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Public Policies and Household Saving written by James M. Poterba and published by University of Chicago Press. This book was released on 2007-12-01 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: The declining U.S. national saving rate has prompted economists and policymakers to ask, should the federal government encourage household saving, and if so, through which policies? In order to better understand saving programs, this volume provides a systematic and detailed description of saving policies in the G-7 industrialized nations: the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom. Each of the seven chapters focuses on one country and addresses a core set of topics: types of accumulated household savings and debt; tax policies toward capital income; saving in the form of public and private pensions, including Social Security and similar programs; saving programs that receive special tax treatment; and saving through insurance. This detailed summary of the saving incentives of the G-7 nations will be an invaluable reference for policymakers and academics interested in personal saving behavior.

Download or read book Moral Hazard in Health Insurance written by Amy Finkelstein and published by Columbia University Press. This book was released on 2014-12-02 with total page 161 pages. Available in PDF, EPUB and Kindle. Book excerpt: Addressing the challenge of covering heath care expenses—while minimizing economic risks. Moral hazard—the tendency to change behavior when the cost of that behavior will be borne by others—is a particularly tricky question when considering health care. Kenneth J. Arrow’s seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of moral hazard for health care, and Amy Finkelstein—recognized as one of the world’s foremost experts on the topic—here examines this issue in the context of contemporary American health care policy. Drawing on research from both the original RAND Health Insurance Experiment and her own research, including a 2008 Health Insurance Experiment in Oregon, Finkelstein presents compelling evidence that health insurance does indeed affect medical spending and encourages policy solutions that acknowledge and account for this. The volume also features commentaries and insights from other renowned economists, including an introduction by Joseph P. Newhouse that provides context for the discussion, a commentary from Jonathan Gruber that considers provider-side moral hazard, and reflections from Joseph E. Stiglitz and Kenneth J. Arrow. “Reads like a fireside chat among a group of distinguished, articulate health economists.” —Choice

Download or read book Handbook of Behavioral Economics Foundations and Applications 1 written by and published by Elsevier. This book was released on 2018-09-27 with total page 749 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Behavioral Economics: Foundations and Applications presents the concepts and tools of behavioral economics. Its authors are all economists who share a belief that the objective of behavioral economics is to enrich, rather than to destroy or replace, standard economics. They provide authoritative perspectives on the value to economic inquiry of insights gained from psychology. Specific chapters in this first volume cover reference-dependent preferences, asset markets, household finance, corporate finance, public economics, industrial organization, and structural behavioural economics. This Handbook provides authoritative summaries by experts in respective subfields regarding where behavioral economics has been; what it has so far accomplished; and its promise for the future. This taking-stock is just what Behavioral Economics needs at this stage of its so-far successful career. Helps academic and non-academic economists understand recent, rapid changes in theoretical and empirical advances within behavioral economics Designed for economists already convinced of the benefits of behavioral economics and mainstream economists who feel threatened by new developments in behavioral economics Written for those who wish to become quickly acquainted with behavioral economics