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  4. October 2018
  5. Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations

American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations

  • Hannes Schwandt
American Economic Journal: Applied Economics
vol. 10, no. 4, October 2018
(pp. 349–77)
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Abstract

Do wealth shocks affect the health of elderly in developed countries? 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 stock-holding retirees. Using data from the 1998–2011 Health and Retirement Study I construct wealth shocks as the interaction of stock holdings with stock market changes. These wealth shocks predict wealth changes and strongly affect health outcomes. A 10% wealth loss leads to an impairment of 2–3% of a standard deviation in physical health, mental health and survival rates.

Citation

Schwandt, Hannes. 2018. "Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations." American Economic Journal: Applied Economics, 10 (4): 349–77. DOI: 10.1257/app.20140499

Additional Materials

JEL Classification

  • D14 Household Saving; Personal Finance
  • G11 Portfolio Choice; Investment Decisions
  • G14 Information and Market Efficiency; Event Studies; Insider Trading
  • I12 Health Behavior
  • J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
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