Elderly Health, Housing, and Mobility

I construct dynamic economic models which focus on an elderly person's decision whether to move in response to changes in his or her health status. The models specify three health states (good, moderately disabled, and poor), three matching housing states (conventional, transitional, and institutional), and explicitly include several different kinds of mobility costs, including the direct utility costs, the indirect health effects of mobility, and, in the more complex model, financial transaction costs. The first model I present examines elderly mobility in a simple environment in which utility depends only on the match between housing and health, and a bequest. The second model extends the first to incorporate housing prices, household wealth, and elderly consumption decisions. Extensive simulations of the two models show that both predict considerable mobility, even when mobility costs are large. The results also highlight the importance of transitional housing, and provide evidence on the relationship between housing, mobility, household wealth, and consumption.