ARC Centre of Excellence in Population Ageing

Juergen Jung , Towson University ; Chung Tran, Australian National University

The content is solely the responsibility of the authors and does not represent the official views of the supporting institutions. [...] To do so, we use two panel data samples from the Health and Retirement Study from 1992–2018 and the Panel Study of Income Dynamics (PSID) from 1984–2019 and form two groups of individuals differentiated by the timing of being exposed to bad health: (i) sick type who reports poor health in at least one of the survey years between the ages of 45 and 55 (treatment group); and (ii) a healthy type who. [...] The removal of bad health states from the model furthermore results in a significant reduc- tion in the wealth gap, measured as the ratio of the 90th to the 50th wealth percentile and the ratio of the 50th to the 25th wealth percentile. [...] The model replicates the pattern discussed in section 2 that shows a rightward shift in the financial asset distribution of healthy individuals as they age, but not for sick individuals who seem to be “stuck” and have limited ability to “move” the financial wealth distribution to the right.35 The model also tracks the average wealth to average income ratio by age, health type, and education level. [...] The difference in available income between the benchmark and the counterfactual world with only good health draws presents a measure of the monetary benefit of good health (or the average cost of falling into poor health if one were to switch the sign of the expression).