Do wealth shocks affect the health of the elderly?

Hannes Schwandt of Princeton has a new paper (pdf) on this topic:

Do wealth shocks affect the health of the elderly in developed countries? The economic literature is sceptical about such effects which have so far only been found for poor retirees in poor countries. In this paper I show that wealth shocks also matter for the health of wealthy retirees in the US. I exploit the booms and busts in the US stock market as a natural experiment that generated considerable gains and losses in the wealth of stockholding retirees. Using data from the Health and Retirement Study I construct wealth shocks as the interaction of stock holdings with stock market changes. These constructed wealth shocks are highly predictive of changes in reported wealth. And they strongly affect health outcomes. A 10% wealth shock leads to an improvement of 2-3% of a standard deviation in physical health, mental health and survival rates. Effects are heterogeneous across physical health conditions, with most pronounced effects for the incidence of high blood pressure, smaller effects for heart problems and no effects for arthritis, diabetes, lung diseases and cancer. The comparison with the cross sectional relationship of wealth and health suggests that the estimated effects of wealth shocks are larger than the long-run wealth elasticity of health.

You can read more by Hannes Schwandt here.

Comments

Now we know who have to receive Eurozone helicopter money

Doesn't really look like satire so it must be simple BS.

Certainly plausible. The effects of anxiety on blood pressure are consistently underestimated, especially if it is episodic which could certainly be true in a bad market since different holdings are often affected at different times.

Steve

"A 10% wealth shock leads to an improvement of 2-3% of a standard deviation": I'd have shot any of my students who'd written drivel like that. (i) No moralising allowed i.e. not "improvement" but "reduction" or "increase" as the case may be. (ii) Shocks can go in either direction, which must be specified.

"I’d have shot any of my students who’d written drivel like that."

Hmm - I thought evolutionary biologists were the only ones who're allowed to use teaching methods like those (http://www.smbc-comics.com/?id=71#comic)...

Truth to tell, the worst I ever did was rip their work up and bin it, before their very eyes.

Except once, when I played against one in a cricket match and gave him a working-over with my fastest, bounciest bowling. By God that was fun.

Having read the paper I think it would be simplest to assume that the tiny, selectively chosen, results simply reflect noise.

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