Perspectives on the Economics of Aging
edited by David A. Wise
University of Chicago Press, 2004
Cloth: 978-0-226-90305-7 | Electronic: 978-0-226-90328-6


This book investigates several important issues in the economics of aging, including the accumulation of wealth and the relationship between health and financial prosperity.

Examining the changes in savings behavior and investment priorities in the United States over the past few decades, contributors to the volume point to a dramatic shift from employer-managed, defined benefit pensions to employee-controlled retirement savings plans. Further, the legislative reforms of the 1980s and the booming stock market of the 1990s did their share to influence individual wealth accumulation patterns of Americans.

These studies also explore the relationship between health status and economic status. Considering issues like pension income and health, mortality, and medical care, contributors present evidence from the United States, Britain, South Africa, and Russia. The volume culminates with wide-ranging discussions on a number of key topics in the field including the innovations that have contributed to a decline in mortality rates; the various medical advances that have benefited populations over time; and the determinants of expenditures on health. The findings with regard to cross-sectional differences in health outcomes and health care utilization also pose troubling questions for policymakers seeking to democratize health care across regions and races.


David A. Wise is the John F. Stambaugh Professor of Political Economy at Harvard University's John F. Kennedy School of Government. He is also the Peter and Helen Bing Senior Fellow at the Hoover Institution, director of the NBER Program on Aging, and editor of many titles including Themes in the Economics of Aging and Advances in the Economics of Aging.



- David A. Wise
DOI: 10.7208/chicago/9780226903286.003.0001
[households, equity, consumption, retirement plans, wealth accumulation, United States, United Kingdom, mortality, medical care, health]
This book confirms previous findings that households typically do not withdraw equity from housing to finance general consumption, but such withdrawal is more likely when a spouse dies or enters a nursing home. In addition to discussions of personal retirement plans and home equity, the book considers other aspects of wealth accumulation and compares asset accumulation in the United States and the United Kingdom. The analyses include consideration of the decline in mortality in the United States and the United Kingdom and the relationship between medical care and mortality. The relationship between pension income and health in South Africa also contributes to the understanding of the health-wealth relationship. The book also includes a formal discussion of econometric methodology to determine the direction of causality. (pages 1 - 16)
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- James M. Poterba, Steven F. Venti, David A. Wise
DOI: 10.7208/chicago/9780226903286.003.0002
[retirement plan contributions, retirement saving, benefit plans, individual retirement saving, retirement assets, contribution rate]
This chapter considers the changes in the magnitude and the composition of saving for retirement over the last two decades. It begins with an analysis of aggregate data on retirement plan contributions before turning to microdata and describing patterns in these data. It documents the changes in aggregate retirement saving over the past twenty-five years and describes how these changes are related to the shift from employer-sponsored defined benefit plans to individual-controlled retirement saving. It then investigates whether the shift toward individual retirement saving, and the accumulation of retirement assets in these accounts, has been offset by a reduction in the assets in other retirement saving plans. It shows that the “retirement plan contribution rate” is much greater than the personal saving rate reported in the National Income and Product Accounts (NIPA) in recent years. (pages 17 - 80)
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- James J. Choi, David Laibson, Brigitte C. Madrian, Andrew Metrick
DOI: 10.7208/chicago/9780226903286.003.0003
[automatic enrollment, Vanguard report, Profit Sharing Council of America, default fund, money market, default contribution rate]
Under automatic enrollment (also called negative election), employees are automatically enrolled in their company's 401(k) plan unless the employees elect to opt out of the plan. This contrasts with the usual arrangement in which employees must actively choose to participate in their employer's 401(k). This chapter evaluates the impact of automatic enrollment over a horizon of up to four years in three different companies. It analyzes data extending to four years after the adoption of automatic enrollment in a second company, and to three years after the adoption of automatic enrollment in a third company. Based on the Vanguard report and the Profit Sharing/401(k) Council of America survey data, the three companies have typical automatic enrollment programs. One of the companies has a default contribution rate of two percent and a stable value default fund, the second has a default contribution rate of three percent and a stable value default fund, and the third has a default contribution rate of three percent and a money market default fund. (pages 81 - 126)
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- Steven F. Venti, David A. Wise
DOI: 10.7208/chicago/9780226903286.003.0004
[home equity, retirement, Health and Retirement Study, financial plan, family shocks, Steven Venti, David Wise, household structure, elderly families]
This chapter examines the change in the home equity of older families as they age, beginning at ages just before retirement. It uses data from the Health and Retirement Study (HRS), the Asset and Health Dynamics Among the Oldest Old (AHEAD) survey, as well as the Survey of Income and Program Participation (SIPP). It distinguishes changes in housing equity that might be thought of as part of a financial plan to use housing equity as a means of general support in retirement from changes in housing equity that are precipitated by family shocks—death or severe illness. The chapter extends the analysis in Steven Venti and David Wise, in which it was found that in the absence of changes in household structure, most elderly families are unlikely to move. The chapter also shows that even among movers, those families that continue to own typically do not reduce home equity. (pages 127 - 175)
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- Jeffrey R. Brown, Scott J. Weisbenner
DOI: 10.7208/chicago/9780226903286.003.0005
[transfer wealth, net worth, savings behaviour, flow of transfers, mortality, household wealth]
This chapter provides new evidence suggesting that transfer wealth accounts for approximately 20 to 25 percent of current household net worth, using the 1998 Survey of Consumer Finances. This figure is calculated in two ways, both of which yield quite similar results: direct survey evidence, and estimating of the flow of transfers in 1998 using an improved methodology that accounts for the correlation between wealth and mortality and converting this into a stock of transfer wealth. In addition to the methodological improvement, new estimates are useful because the composition of household wealth has changed substantially over the past several decades. Second, the chapter examines the heterogeneity of the size of transfers received and expected. It demonstrates that while in aggregate, transfer wealth does not appear to be as large as some prior estimates suggest, it is nonetheless quite important for a small subset of the population. (pages 181 - 204)
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- James Banks, Richard Blundell, James P. Smith
DOI: 10.7208/chicago/9780226903286.003.0006
[United States, United Kingdom, households, wealth, housing equities, financial assets, stock equity, equity markets]
This chapter documents and attempts to explain differences in household wealth distributions between the United States and the United Kingdom, with an emphasis on the quite different portfolios held in stock and housing equities in the two countries. As a proportion of their total wealth, British households hold relatively small amounts of financial assets—including equities in stock—compared to American households. In contrast, British households appear to move into home ownership at relatively young ages, and a large fraction of their household wealth is concentrated in housing. Finally, the age gradient in home equity appears to be much steeper in the United Kingdom whereas U.S. households exhibit a steeper age gradient in stock equity. Moreover, these portfolio differences between the two countries are not temporally static, as important changes have been taking place in both countries in their housing and equity markets. (pages 205 - 244)
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- Angus Deaton, Christina Paxson
DOI: 10.7208/chicago/9780226903286.003.0007
[mortality, income, income inequality, United States, Britain, Angus Deaton, Christina Paxson]
This chapter is concerned with the time-series patterns of mortality, income, and income inequality in the United States and Britain. One starting point is Angus Deaton and Christina Paxson, in which pooled time-series and cross-sectional data from the United States are used to estimate a strong protective effect of income across birth cohorts that closely matched estimates from individual-level data from the National Longitudinal Mortality Study. The chapter finds no evidence for the proposition that year and age-specific income inequality is a health hazard; indeed, the regressions show protective effects of higher inequality, essentially because for adults aged thirty-five and over in the United States, mortality declined more rapidly during the period of rapid increase in income inequality in the 1980s than it did in the 1970s, before income inequality began to increase. The chapter extends its analysis to British data, and to a comparative examination of the British and American mortality experiences. (pages 247 - 286)
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- Anne Case
DOI: 10.7208/chicago/9780226903286.003.0008
[income, South Africa, pension, health status, integrated family survey, mental health, economic status, social connectedness]
This chapter quantifies the impact of a large, exogenous increase in income—that associated with pensions in South Africa—on health status. It shows in households that pool income, the pension protects the health of all household members, working in part to protect the nutritional status of household members, in part to improve living conditions, and in part to reduce the stress under which the adult household members negotiate day-to-day life. The chapter begins with a discussion of an integrated family survey run in 1999, one that captured information on individuals' health, mental health, social connectedness, and economic status. It also documents the relationship between income and health status and then turns to the pension as an instrument, allowing it to identify the causal impact of income on health status. (pages 287 - 305)
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- Robert T. Jensen
DOI: 10.7208/chicago/9780226903286.003.0009
[socioeconomic status, Russia, health, risk factors, blood pressure, nutrient intake, self-reports, elderly]
Using data from a nationally representative household-level survey, this chapter explores the relationship between health and socioeconomic status (SES) for the elderly in Russia. First, it considers the basic relationship, which is valuable because there has been little evidence on the health-SES relationship for transition economies. Second, it presents evidence from a variety of measures of health and health risk factors, including measurements of blood pressure, weight, and height conducted by trained enumerators, as well as nutrient intake derived from twenty-four- and forty-eight-hour food intake diaries. Therefore, it need not rely exclusively on self-reports of health status, where response choices may have different interpretations for different people (as in self-reported overall health status), or where there may be problems of differential reporting by SES (for example, due to differential knowledge or awareness of health conditions). (pages 313 - 327)
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- David M. Cutler, Ellen Meara
DOI: 10.7208/chicago/9780226903286.003.0010
[mortality, United States, epidemiology, infectious diseases, life expectancy, elderly]
Mortality rates declined extremely rapidly in the United States over the twentieth century, as they did in all developed countries. This change has been accompanied by several important epidemiological trends. Throughout the first half of the twentieth century, infectious diseases were the leading cause of death. This chapter does not quantify the role of medicine, income, social programs, and other factors in improved mortality in the last half century, but shows examples where each is important as a first step in this research process. It first presents the basic facts about changes in the age distribution of mortality change and life expectancy improvements, highlighting the growing role of mortality reductions among the elderly. It then examines why this trend has occurred, discussing in particular the epidemiology of mortality reduction at different points in time and for different causes. (pages 333 - 366)
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- Victor R. Fuchs, Mark McClellan, Jonathan Skinner
DOI: 10.7208/chicago/9780226903286.003.0011
[utilization, mortality, universal insurance, Medicare, health outcome, morbidity, whites, Donald Nichols, blacks]
This chapter has two main sections: utilization and mortality. In most markets, an interest in expenditures would require attention to prices as well as quantities, but given universal insurance coverage through Medicare, utilization is a natural subject for discussion. Mortality is only one of many possible measures of health, but there are several reasons to concentrate on it. First, mortality is by far the most objective measure. Second, it is, for most people, the most important health outcome. Third, it is probably significantly correlated with morbidity because most deaths are preceded by illness. The chapter focuses on whites, aged 65–84, or more specifically, those people not identified as African-American. Moreover, preliminary research by Donald Nichols suggests that the relationship between those other variables and utilization and mortality may be significantly different for blacks than for whites. (pages 367 - 414)
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- Peter Adams, Michael D. Hurd, Daniel Mcfadden, Angela Merrill, Tiago Ribeir
DOI: 10.7208/chicago/9780226903286.003.0012
[Peter Adams, Michael D. Hurd, Daniel McFadden, Angela Merrill, health, wealth, education, socioeconomic status, elderly population]
This chapter consists of four components. The first is the paper Healthy, Wealthy and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status by Peter Adams, Michael D. Hurd, Daniel McFadden, Angela Merrill, and Tiago Ribeiro, which originally was presented at the conference and then appeared in the Journal of Econometrics. The second is a new addendum that describes updates in data and analysis since its publication. The third includes additional appendix tables, while the fourth refers to the authors' response to comments on the paper. The links between health, wealth, and education have been studied in a number of populations, with the general finding that higher socioeconomic status is associated with better health and longer life. The chapter tests for the absence of direct causal links in an elderly population by examining whether innovations in health and wealth in a panel are influenced by features of the historical state. (pages 415 - 501)
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Author Index

Subject Index