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Marco Cozzi and Qiushan Li
''Do wealth shocks matter for the life satisfaction of the elderly? Evidence from the health and retirement study''
( 2024, Vol. 44 No.1 )
We study the importance of wealth shocks as a determinant of life satisfaction for the elderly and near-elderly. With data from the U.S. Health and Retirement Study, we specify an econometric analysis exploiting the 2008-09 financial crisis as a source of exogenous variation in wealth, caused by a long-lasting decrease in asset prices. Although absolute changes in wealth are not found to systematically affect individual well-being, losing 60% or more of the pre-crisis wealth negatively impacted measures of life satisfaction. The results are shown to hold also in a number of robustness checks. The financial crisis wealth shock is found to have a persistent detrimental effect on the well-being of the American elderly. Finally, we argue that the simultaneity bias arising from neglecting the endogeneity of wealth accumulation can be substantial.
Keywords: Wealth, Uninsurable shocks, Life Satisfaction, Subjective Well-Being
JEL: I3 - Welfare and Poverty: General
D1 - Household Behavior: General
Manuscript Received : Oct 29 2021 Manuscript Accepted : Mar 30 2024

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