Nicole Maestas

Household Portfolio Choices, Health Status and Health Care Systems: A Cross-Country Analysis Based on SHARE

Vincenzo Atella et al. — Thu, 30 Jun 2011 13:58:10 PDT

Health risk is increasingly viewed as an important form of background risk that affects household portfolio decisions. However, its role might be mediated by the presence of a protective full-coverage National Health System that could reduce households’ probability of incurring current and future out-of-pocket medical expenditures. In this paper, we first sketch a theoretical framework in which household portfolio decisions are a function of both individual and systemic characteristics. Then, we test its main implications based on SHARE data, studying the influence of current health status and future health risk on the decision to hold risky assets, across 10 European countries with different health care systems, each offering a different degree of protection against out-of-pocket medical expenditures. We find robust empirical confirmation of our model implications, since perceived health condition matters more than objective health condition and, consistent with the theoretical underpinnings of background risk, health risk affects portfolio choices only in countries with less protective health care systems. Furthermore, portfolio decisions consistent with background risk models are observed only with respect to middle-aged and highly educated investors.

Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt

Nicole Maestas et al. — Thu, 30 Jun 2011 13:44:03 PDT

We present the first estimates of the causal effect of SSDI receipt on the labor supply generalizable to the entire population of program entrants in the present day system. We take advantage of a unique workload management database to match Social Security Disability Insurance (SSDI) applicants to disability examiners, and use natural variation in examiners’ allowance rates to estimate the labor supply effects of SSDI. Because applicants are randomly assigned to examiners (conditional on observable characteristics), examiner-specific allowance rates can be used to instrument for the allowance decision in a labor supply equation contrasting denied vs. allowed applicants. We find that the labor force participation rate of the marginal entrant would be on average 21 percentage points greater in the absence of SSDI benefit receipt. His or her likelihood of engaging in substantial gainful activity as defined by the SSDI program would be on average 13 percentage points higher, and he or she would earn $1,600 to $2,600 more per year on average in the absence of SSDI benefit receipt. The marginal entrant is likely to have a mental impairment, be young, and have low pre-onset earnings. Importantly, the disincentive effect varies across individuals with impairments of different degrees of unobservable severity, ranging from a low of 10 percentage points for those with more severe impairments to a high of 60 percentage points for entrants with relatively less severe impairments.

How Longer Work Lives Ease the Crunch of Population Aging

Nicole Maestas et al. — Thu, 13 Aug 2009 12:06:41 PDT

[Formerly Work at Older Ages: The Shape of Change]

Population aging is not a looming crisis of the future -- it is already here. Economic challenges arise when the increase in people surviving to old age and the decline in the number of young people alive to support them cause the growth in society's consumption needs to outpace growth in its productive capacity. The ultimate impact of population aging on our standard of living in the future depends a great deal on how long people choose to work before they retire from the labor force. Here, there is reason for optimism. A constellation of forces, some just now gaining momentum, has raised labor force participation at older ages at just the time it is needed. We examine the most important factors behind the increase in labor force participation realized to date: the shift in the skill composition of the workforce, and technological change. We argue that forces such as changes in the structure of employer-provided pensions and Social Security are likely to propel future increases in labor force participation at older ages. The labor market is accommodating older workers to some degree, and older men and women are themselves adapting on a number of fronts, which could substantially lessen the economic impact of population aging. Age-related health declines and the reluctance of employers to hire and retain older workers present challenges, but the outlook for future gains in labor force participation at older ages is promising.

Cohort Differences in Retirement Expectations and Realizations

Nicole Maestas — Thu, 12 Feb 2009 16:32:08 PST

Price Variation in Markets with Homogeneous Goods: The Case of Medigap

Nicole Maestas et al. — Thu, 12 Feb 2009 15:35:20 PST

About one-third of elderly Americans age 65 and older supplements their Medicare health insurance in a private insurance market known as the “Medigap” market. Prices for Medigap policies vary widely, despite the fact that regulations enacted in 1992 standardized all Medigap policies, thereby creating a market with homogenous insurance products. Economic theory suggests that consumer search costs can lead to a nondegenerate price distribution within a market for otherwise homogenous goods. Using a structural model of equilibrium search costs first posed by Carlson and McAfee (1983), we find that nearly all consumers face search costs high enough to prevent them from searching until they find the lowest priced Medigap policy. We estimate average search costs to be $249, substantially higher than has been found in other markets, but plausible given the complex nature of the Medigap market and its elderly consumer population. The implied aggregate welfare loss is approximately $798 million or $484 per policyholder.

The Effect of Retirement Incentives on Retirement Behavior: Evidence from the Self-Employed in the United States and England

Julie Zissimopoulos et al. — Thu, 12 Feb 2009 15:14:53 PST

Discouraged Workers? Job Search Outcomes of Older Workers

Nicole Maestas et al. — Thu, 12 Feb 2009 15:08:40 PST

Many have suggested we adopt policies that explicitly encourage the elderly to work. Behind this suggestion is the assumption that if an older person desires a job, one will be found; however, little is known about the extent to which this is true, and in the Health and Retirement Study, many more respondents say they expect to work after retirement than actually undertake work. This raises an important question: To what extent can the elderly readily find suitable jobs? In the context of a theoretical job search model, we examine the decision to search for a job and the probability of transitioning to employment using a large sample of non-workers from the Health and Retirement Study. The effects of both supply-side factors (individual characteristics) and demand-side factors (local labor market conditions) are estimated with a set of reduced form econometric models. We find employment transition rates are relatively low for older searchers: only half of older searchers successfully attain jobs. We examine various explanations for this result, including variation in search intensity, reservation wages, and the possibility of intervening health shocks. We conclude that about 13% of older job searchers becomes a discouraged worker in the sense of being willing to work at the prevailing wage, but unable to find a job.

Burnout and the Retirement Decision

Nicole Maestas et al. — Thu, 12 Feb 2009 15:01:09 PST

Medical Expenditure Risk and Household Portfolio Choice

Dana P. Goldman et al. — Thu, 12 Feb 2009 14:32:44 PST

Back to Work: Expectations and Realizations of Work after Retirement

Nicole Maestas — Thu, 12 Feb 2009 14:28:55 PST

This forthcoming paper analyzes a puzzling aspect of retirement behavior known as "unretirement." Nearly 50 percent of retirees follow a nontraditional retirement path that involves partial retirement or unretirement, and at least 26 percent of retirees later unretire. I explore two possible explanations: 1) unretirement transitions result from failures in planning or financial shocks; and 2) unretirement transitions are anticipated prior to retirement, reflecting a more complex retirement process. I show that unretirement was anticipated for the vast majority of those returning to work, and is not a result of financial shocks, poor planning or low wealth accumulation.

Does Medicare Save Lives?

David Card et al. — Wed, 11 Feb 2009 17:09:26 PST

Health insurance characteristics shift at age 65 as most people become eligible for Medicare. We measure the impacts of these changes on patients who are admitted to hospitals through emergency departments for conditions with similar admission rates on weekdays and weekends. The age profiles of admissions and comorbidities for these patients are smooth at age 65, suggesting that the severity of illness is similar on either side of the Medicare threshold. In contrast, the number of procedures performed in hospitals and total list charges exhibit small but statistically significant discontinuities, implying that patients over 65 receive more services. We estimate a nearly 1-percentage-point drop in 7-day mortality for patients at age 65, equivalent to a 20% reduction in deaths for this severely ill patient group. The mortality gap persists for at least 9 months after admission.

The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare

David Card et al. — Wed, 11 Feb 2009 16:58:13 PST

Peer Groups and Employment Outcomes: Evidence Based on Conditional Random Assignment in the U.S. Army

Seo Yeon Hong et al. — Tue, 05 Aug 2008 17:26:29 PDT