Search Results
Journal Article
Evidence on entrepreneurs in the United States: data from the 1989–2004 survey of consumer finances
Using data from the Federal Reserve Board?s Survey of Consumer Finances, the authors examine characteristics of entrepreneurs and the businesses they run. Their analysis confirms that business owners are important sources of saving and wealth creation in the U.S. and that they are less risk averse than other wealthy households. This discounts the notion that the wealth of entrepreneurs disproportionately reflects a buildup of precautionary balances to guard against financial risk.
Journal Article
Income inequality and redistribution in five countries
This article studies income inequality in five countries and compares the redistributive consequences of taxes and transfers across these countries.
Newsletter
Piketty’s Book and Macro Models of Wealth Inequality
Thomas Piketty?s book Capital in the Twenty-First Century is, in the author?s own words, a book about the history of the distribution of income and wealth. Among other interesting and important facts, the book quantifies the evolution of wealth inequality and wealth concentration over time and across a number of countries. Wealth is highly concentrated, and its distribution is skewed with a long right tail; a small number of very rich individuals hold a large share of total wealth in the economy.
Briefing
Why Do Couples and Singles Save During Retirement?
While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles and generate transfers to nonspousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to ...
Report
Wealth inequality and intergenerational links
Previous work has had difficulty generating household saving behavior that makes the distribution of wealth much more concentrated than that of labor earnings, and that makes the richest households hold onto large amounts of wealth, even during very old age. I construct a quantitative, general equilibrium, overlapping-generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability. I show that voluntary bequests can explain the emergence of large estates, while accidental bequests alone cannot, and that adding earnings persistence within ...
Newsletter
Savings after Retirement: A Survey
Retired U.S. households, especially those with high income, decumulate their assets more slowly than implied by the basic life cycle model. The observed patterns of out-of-pocket medical expenses, which rise quickly with age and income during retirement, and longevity, which also rises with income, can explain a significant portion of U.S. retirement saving. However, more work is needed to disentangle these precautionary motives from other motives, such as the desire to leave bequests.
Working Paper
Health Inequality and Economic Disparities by Race, Ethnicity, and Gender
We measure health inequality during middle and old age by race, ethnicity, and gender and evaluate the extent to which it can explain inequalities in other key economic outcomes using the Health and Retirement Study data set. Our main measure of health is frailty, which is the fraction of one’s possible health deficits and is related to biological age. We find staggering health inequality: At age 55, Black men and women have the frailty, or biological age, of White men and women 13 and 20 years older, respectively, while Hispanic men and women exhibit frailty akin to White men and women 5 ...
Journal Article
Medical Spending, Bequests, and Asset Dynamics around the Time of Death
Using data from the Health and Retirement Survey, we document the changes in assets that occur before a person's death. Applying an event study approach, we find that during the six years preceding their deaths, the assets of single decedents decline, relative to those of similar single survivors, by an additional $20,000 on average. Over the same time span, the assets of couples who lose a spouse fall, relative to those of similar surviving couples, by an additional $90,000 on average. Households experiencing a death also incur higher out-of-pocket medical spending and other end-of-life ...
Journal Article
Right before the end: asset decumulation at the end of life
Using data from the Asset and Health Dynamics of the Oldest Old survey, the authors find that the assets of people who die decline much faster than the assets of people who survive, even after controlling for age, sex, and initial asset levels. Out-of-pocket medical expenses right before death can deplete the assets of many elderly households and constitute an important reason to keep assets in old age.
Journal Article
The Lifetime Medical Spending of Retirees
Using dynamic models of health, mortality, and out-of-pocket medical spending (both inclusive and net of Medicaid payments), we estimate the distribution of lifetime medical spending that retired US households face over the remainder of their lives. We find that households who turned 70 in 1992 will, on average, incur $122,000 in medical spending, including Medicaid payments, over their remaining lives. At the top tail, 5 percent of households will incur more than $300,000 and 1 percent of households will incur over $600,000 in medical spending inclusive of Medicaid. The level and the ...