The Impact of Medical and Nursing Home Expense Risk and Social Insurance Policies on Savings and Inequality.
Joint with Tatyana Koreshkova.
Work in progress August 2008.
Abstract:
The objective of this paper is to assess the impact of medical and nursing home expense risk on wealth accumulation and inequality, and to quantitatively evaluate alternative old-age social insurance policies. Our approach is novel for three reasons. First, we document some facts on the distribution of medical and nursing home expenditures, and highlight the differences between the two types of risks. Second we explicitly model nursing home expense risk in addition to medical expense risk in order to capture the fact that nursing home costs are one of the largest faced by the elderly (the others are hospital costs) and the least insured by both the government and through the private sector. Third, contrary to previous studies, our model is cast in a general equilibrium framework, allowing us to capture and analyze the price effects of policy changes on savings and inequality. We argue that current social insurance policy in the U.S. provides differential insurance against medical versus nursing home expense risk and show that this differential plays a crucial role in both aggregate and cross-sectional wealth accumulation. We also show that general equilibrium effects of policy changes on prices and taxes have important distributive consequences.
The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is about 4 percent of consumption expenditure.
Macro models are developed to explore the impact of technological progress on the household. Chapter 1 focuses on the impact of technological progress in transportation on suburbanization. In Chapter 2, a model with leisure production and endogenous retirement is used to explain the declining labor-force participation rates of elderly males. Finally, in Chapter 3, the welfare gain from technological progress in personal computer production is measured by constructing a simple model of computer demand.
A
model with leisure production and endogenous retirement
is used to explain the declining labor-force participation
rates of elderly males. Using the Health and Retirement
Study, the model is calibrated to cross-sectional
data on the labor-force participation rates of
elderly US males by age and their average drop
in market consumption in the year 2000. Running
the calibrated model for the period 1850 to 2000,
a prediction of the evolution of the cross-section
is obtained and compared with data. The model
is able to predict both the increase in retirement
since 1850 and the observed drop in market consumption
at the moment of retirement. The increase in retirement
is driven by rising real wages and a falling price
of leisure goods over time.
During
the period 1910 to 1970, an increasing fraction
of the urban population in the US chose to live
on the outskirts of central cities. This was also
a time when a major innovation in transportation
technology, the automobile, was introduced and
widely adopted. The objective of this paper is
to assess quantitatively the relationship between
the two. To achieve this, a simple model is constructed
in which agents can choose where to live and whether
or not to buy a car. When the model is calibrated,
it can explain about 70 percent of the rise in
car-ownership over the period 1910 to 1970 and
all of the suburbanization trend. According to
the model, rising income and falling car prices
alone are not enough to generate the suburbanization
trend. It is essential to have also: (i) a declining
cost of commuting by car which allows car-owners
to live further away from the city center, and
(ii) a rising cost of using public transportation
which encourages agents to make the swith to automobiles.
