Savings and Health Behavior over the Lifecycle and across Generations


Household decisions regarding savings, consumption, employment and health behavior over the life-cycle.


Standard models of savings and retirement put forth in the literature fall short of explaining several important features of the data concerning wealth and savings inequality as well as intergenerational correlations in wealth inequality. The goal of this project is to develop and estimate a more general model of household savings, employment, retirement, and health investment decisions that allows for both observed and unobserved sources of household heterogeneity. A key feature of the model is that households are allowed to differ in their time preference parameters. The model will be used to explain cross-sectional wealth and savings differences as well as intergenerational correlations in savings behavior and wealth. We can also use the model to simulate the effects of government policy changes on savings, such as the effect of a change in social security entitlements. This proposal also presents results from some preliminary analysis that motivates some of the assumptions of the theoretical framework.

Funded By: 
Award Dates: 
July 1, 2003 - June 30, 2004
PARC Grant Year: 
Year 10