CDHA CAAR

A. “Medicaid Insurance in Old Age,” by Mariacristina De Nardi, Eric French, and John Bailey Jones (w19151, June 2013, .pdf format, 50p.).

Abstract:

The old age provisions of the Medicaid program were designed to insure poor retirees against medical expenses. However, it is the rich who are most likely to live long and face expensive medical conditions when very old. We estimate a rich structural model of savings and endogenous medical spending with heterogeneous agents, and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across single retirees.

We find that retirees with high lifetime incomes can end up on Medicaid, and often value Medicaid’s insurance features the most, as they face a larger risk of catastrophic medical needs at old ages, and face the greatest consumption risk. Finally, our compensating differential calculations indicate that retirees value Medicaid insurance at more than its actuarial cost, but that most would value expansions of the current Medicaid program at less than cost.

www.nber.org/papers/w19151

B. “Donative Behavior at the End of Life,” by Jonathan Meer and Harvey S. Rosen (w19145, June 2013, .pdf format, 20p.).

Abstract:

A general finding in the empirical literature on charitable giving is that among older individuals, both the probability of giving and the conditional amount of donations decrease with age, ceteris paribus. In this paper, we use data on giving by alumni at an anonymous university to investigate end-of-life giving patterns. Our main finding is that taking into account the approach of death substantially changes the age-giving profile for the elderly-in one segment of the age distribution, the independent effect of an increase in age on giving actually changes from negative to positive.

We examine how the decline in giving as death approaches varies with the length of time that a given condition is likely to bring about death, and the individual’s age when he died. We find that for individuals who died from conditions that bring about death fairly quickly, there is little decline in giving as death approaches compared to those who died from other causes. Further, the decline in giving as death approaches is steeper for the elderly (for whom death is less likely to be a surprise) than for the relatively young. These findings suggest that our primary result, that failing to take into account the approach of death leads to biased inferences with respect to the age-giving profile, is not merely an artifact of some kind of nonlinearity in the relationship between age and giving.

www.nber.org/papers/w19145

C. “Informal Care and Caregiver’s Health,” by Young Kyung Do, Edward C. Norton, Sally Stearns, and Courtney H. Van Houtven (w19142, June 2013, .pdf format, 30p.).

Abstract:

This study aims to measure the causal effect of informal caregiving on the health and health care use of women who are caregivers, using instrumental variables. We use data from South Korea, where daughters and daughters-in-law are the prevalent source of caregivers for frail elderly parents and parents-in-law. A key insight of our instrumental variable approach is that having a parent-in-law with functional limitations increases the probability of providing informal care to that parent-in-law, but a parent-in-law’s functional limitation does not directly affect the daughter-in-law’s health. We compare results for the daughter-in-law and daughter samples to check the assumption of the excludability of the instruments for the daughter sample. Our results show that providing informal care has significant adverse effects along multiple dimensions of health for daughter-in-law and daughter caregivers in South Korea.

www.nber.org/papers/w19142

D. “Propagation and Smoothing of Shocks in Alternative Social Security Systems,” by Alan Auerbach, Lorenz Kueng, and Ronald Lee (w19137, June 2013, .pdf format, 41p.).

Abstract:

Even with well-developed capital markets, there is no private market mechanism for trading between current and future generations, so a potential role for public old-age pension systems is to spread economic and demographic shocks among different generations. This paper evaluates the smoothing and propagation of shocks of three pay-as-you-go public pension schemes, based on the actual U.S. and German systems, which vary in the extent to which they rely on tax adjustments versus benefit adjustments to provide annual cash-flow budget balance. Modifying the Auerbach-Kotlikoff (1987) dynamic general-equilibrium overlapping generations model to incorporate realistic patterns of fertility and mortality and shocks to productivity, fertility and mortality, we evaluate the effectiveness of the three public pension systems at spreading the effects of such shocks. We find that the systems, particularly those that rely to some extent on tax adjustments, are effective at spreading fertility and mortality shocks, but that this is not the case for productivity shocks, for which the pension systems actually tend to concentrate the economic impact. These results suggest that both system design and the source of shocks are important factors in determining the potential of public pension arrangements to spread the burden of shocks.

www.nber.org/papers/w19137