Monthly spending dynamics of the elderly following a health shock: Evidence from Singapore

• Main Authors: CHENG, Terence C., LI, Jing, VAITHIANATHAN, Rhema
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Health shocks; Health expenditure; Consumption; Insurance; Panel data; Asian Studies; Behavioral Economics; Gerontology; Health Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2230; https://ink.library.smu.edu.sg/context/soe_research/article/3229/viewcontent/CLV_HealthShocks_SLP_9_July_2018.pdf; https://ink.library.smu.edu.sg/context/soe_research/article/3229/filename/0/type/additional/viewcontent/hec3824_sup_0001_online.PDF
• Institution: Singapore Management University

We use novel longitudinal data from 19 monthly waves of the Singapore Life Panel to examine the short-term dynamics of the effects health shocks have on household health and non-health spending and income by the elderly. The health shocks we study are the occurrence of new major conditions such as cancer, heart problems, and minor conditions (e.g. diabetes, and hypertension). Our empirical strategy exploits unanticipated changes in health status through the diagnosis of new health conditions, combined with an individual fixed effect framework. We find that major shocks have large and persistent effects while minor shocks have small and mainly contemporaneous effects. We find that household income reduces following a major shock for males but not females. Major health shocks lead to a decrease in households’ non-health expenditures that is particularly pronounced for cancer and stroke sufferers, driven largely by reductions in leisure spending. The financial impact of major shocks on medical saving account balances occur to those without private health insurance, while the impact is on cash balances for privately insured individuals.