In this project we extend an augmented lifecycle model, incorporating a Grossman-style model of health capital, to enhance understanding of factors influencing consumption, wealth and health. We develop three primary results when using the model to explore the effects of stylized versions of...

We develop a rich model to study the complex interrelationship between health insurance and retirement decisions. The decision to retire depends on a number of factors including availability of health insurance, health shocks, pensions, Social Security, and how consumption and health interact in...

This paper uses repeated cross-sectional data from the Surveys of Consumer Finances (SCF) to characterize cohort patterns of net worth and debt of American households. Cohort patterns provide a useful benchmark for identifying potentially vulnerable households based on relative financial...

We analyze long-span data on real interest rates and productivity growth with the focus on estimating their long-run correlation. The evidence points to a moderately negative correlation, meaning that real interest rates are mildly countercyclical, although the estimates are not precise. Our...

Understanding whether the elderly are saving adequately is fundamental to understanding whether elderly households are able to maintain reasonable living standards. One factor that affects wealth accumulation is the extent to which parents need to support children and the extent to which...

We develop a model of health investments and consumption over the life cycle where health affects longevity, provides flow utility, and retirement is endogenous. We develop a rich, numerical life-cycle model to study the complex interrelationship between health and wealth and the age of...

This paper presents a preliminary model of health investments over the life cycle. Health affects both longevity and provides flow utility. We analyze the interplay between consumption choices and investments in health by solving each household’s dynamic optimization problem to obtain...

This paper examines the effects of children on consumption and wealth. To anchor intuition, we develop implications using a simple permanent income model with no uncertainty and complete markets. But this framework does not come close to matching the distribution of existing wealth. We therefore...

Common financial planning advice calls for households to ensure that retirement income exceeds 70 percent of average pre-retirement income. We use an augmented life-cycle model of household behavior to examine optimal replacement rates for a representative set of retired American households. We...

Many people fear that Americans are preparing poorly for retirement. But developing rigorous evidence on this issue is difficult. In this paper we briefly discuss evidence on the adequacy of retirement wealth accumulation. We conclude that existing descriptive evidence does not seem consistent...