Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284238 
Year of Publication: 
2023
Series/Report no.: 
IFS Working Papers No. 23/12
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
In the U.S, after age 65, households face income and health risks and a large fraction of these risks are transitory. While consumption significantly responds to transitory income shocks, out-of-pocket medical expenses do not. In contrast, both consumption and out-of-pocket medical expenses respond to transitory health shocks. Thus, most U.S. elderly keep their out-of-pocket medical expenses close to a satiation point that varies with health. Consumption responds to health shocks mostly because adverse health shocks reduce the marginal utility of consumption. The effect of health on marginal utility changes the optimal transfers due to health shocks.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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