research

Abstract. This paper studies how family care changes the value of Medicaid long-term-care insurance. Using HRS data, I estimate a life-cycle model of singles, couples, and widowed survivors with health risk, family care, saving, and means-tested Medicaid. Family care is worth \$24,970 to the age-70 recipient household but saves Medicaid only \$809 per household. A 10 percent floor expansion is worth \$2,843 with family care and \$3,647 without it, implying a 22.1 percent offset. The population offset is mostly non-spousal, while both care margins matter within couples. Widowhood raises Medicaid exposure from 3.4 to 12.5 percent primarily through reduced resources.

Abstract. Black retirees hold about one-fifth the wealth of White retirees at age 70, and the ratio barely moves until death. Using the Health and Retirement Study, I document that Black single retirees receive roughly twice the family-provided care and reach the end of life with a quarter of the out-of-pocket medical spending of White decedents. I then estimate a life-cycle model in which family care insures long-term-care risk: intensively caregiving families face far lower nursing-home risk and hold less precautionary wealth. Common preferences with race-specific circumstances reproduce both groups' wealth paths, and conditions at retirement account for 86–95 percent of the racial wealth gap after 70. Long-term-care reforms that compensate family caregivers and reforms that publicly insure institutional risk carry opposite racial incidence.

Abstract. We quantify why most households save and work, using a life-cycle model with wage risk, endogenous labor supply of both spouses, marital transitions, health, medical expenses, mortality, and bequest motives at the death of the first and last household member, estimated on PSID and HRS data. A model with more motives to save and endogenous labor supply implies smaller roles for precautionary saving against wage risk and for bequest motives than previously suggested. Modeling the entire life cycle implies a larger role for medical expenses, because households save and work for them long before they retire. Marriage and divorce risk has large and offsetting effects on the savings of couples and singles, and thus small effects on aggregate savings, but affects aggregate earnings as much as wage risk.

Abstract. We study who bears the welfare cost of health risk and whether home production provides self-insurance. Using matched panel data on consumption, time use, health, and wages, we show that large cross-sectional health gradients in wages and recovered home-production efficiency are largely driven by selection: within couples they nearly disappear, and neither changes at illness onset. We therefore classify couples by permanent income and estimate income-specific health processes in a life-cycle model. Low-income couples spend three times as many years in bad health and hold only one-quarter as much wealth as high-income couples. The model implies that health risk is three times more costly for low-income households, which cope mainly by drawing down assets rather than increasing home production.