Uncertain health and survival: Effects on end-of-life consumption

Lee A. Lillard, Yoram Weiss

Research output: Contribution to journalArticlepeer-review

Abstract

This article analyzes the impact of health and survival uncertainty on the saving and consumption decisions of retirees. A dynamic programming approach is used to model the household’s planning problem. The utility parameters are estimated using panel data. We find that a fall into poor health raises the marginal utility from consumption. Simulations are used to indicate the effects of falling into poor health and loss of spouse. They reveal a large transfer from the healthy to the sick partner and a strong dependence of saving on the survivor benefits, suggesting that concern about the surviving spouse is an important motive for saving.

Original languageEnglish
Pages (from-to)254-268
Number of pages15
JournalJournal of Business and Economic Statistics
Volume15
Issue number2
DOIs
StatePublished - Apr 1997

Keywords

  • Health
  • Saving
  • Uncertainty

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