Working Paper: CEPR ID: DP13582
Authors: Mariacristina De Nardi; Margherita Borella; Fang Yang
Abstract: White, non-college-educated Americans born in the 1960s face shorter life expectancies, higher medical expenses, and lower wages per unit of human capital compared with those born in the 1940s, and men's wages declined more than women's. After documenting these changes, we use a life-cycle model of couples and singles to evaluate their effects. The drop in wages depressed the labor supply of men and increased that of women, especially in married couples. Their shorter life expectancy reduced their retirement savings but the increase in out-of-pocket medical expenses increased them by more. Welfare losses, measured a one-time asset compensation are 12.5%, 8%, and 7.2% of the present discounted value of earnings for single men, couples, and single women, respectively. Lower wages explain 47-58% of these losses, shorter life expectancies 25-34%, and higher medical expenses account for the rest.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower wages (J31) | reduced labor supply for men (J22) |
| lower wages (J31) | increased labor supply for women (J21) |
| shorter life expectancy (I14) | reduced retirement savings (D14) |
| increased out-of-pocket medical expenses (H51) | increased retirement savings (D14) |
| shorter life expectancy (I14) | welfare losses (D69) |
| increased out-of-pocket medical expenses (H51) | welfare losses (D69) |