Why do the Elderly Save? The Role of Medical Expenses / Mariacristina De Nardi, Eric French, John Bailey Jones.

Format:

Book

Author/Creator:

De Nardi, Mariacristina.

Contributor:

National Bureau of Economic Research.

French, Eric.

Jones, John Bailey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15149.

NBER working paper series no. w15149

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

This paper constructs a rich model of saving for retired single people. Our framework allows for bequest motives and heterogeneity in medical expenses and life expectancies. We estimate the model using AHEAD data and the method of simulated moments. The data show that out-of-pocket medical expenses rise quickly with both age and permanent income. For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest. These government programs, however, also benefit the rich because they insure them against their worst nightmares about their very old age: either not being able to afford the medical care that they need, or being left destitute by huge medical bills.

Notes:

Print version record

July 2009.