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The Evolution of Health over the Life Cycle
We construct a unified objective measure of health status: the frailty index, defined as the cumulative sum of all adverse health indicators observed for an individual. First, we show that the frailty index has several advantages over self-reported health status, particularly when studying health dynamics. Then we estimate a stochastic process for frailty dynamics over the life cycle. We find that the autocovariance structure of frailty in panel data strongly supports a process that allows the conditional variance of frailty shocks to increase with age. Our frailty measure and dynamic process ...
Risk sharing, inequality, and fertility
We use an extended Barro-Becker model of endogenous fertility, in which parents are heterogeneous in their labor productivity, to study the efficient degree of consumption inequality in the long run. In our environment a utilitarian planner allows for consumption inequality even when labor productivity is public information. We show that adding private information does not alter this result. We also show that the informationally constrained optimal insurance contract has a resetting property - whenever a family line experiences the highest shock, the continuation utility of each child is ...