Working Paper: NBER ID: w22513
Authors: James Banks; Richard Blundell; Peter Levell; James P. Smith
Abstract: In this paper we document significantly steeper declines in nondurable expenditures in the UK compared to the US, in spite of income paths being similar. We explore several possible causes, including different employment paths, housing ownership and expenses, levels and paths of health status, number of household members, and out-of -pocket medical expenditures. Among all the potential explanations considered, we find that those to do with healthcare—differences in levels and age paths in medical expenses—can fully account for the steeper declines in nondurable consumption in the UK compared to the US.
Keywords: Lifecycle Consumption; Medical Expenditures; Nondurable Consumption; Aging; UK; US
JEL Codes: D10; D11; D12; D14; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Differences in healthcare financing (H51) | Differences in consumption patterns (D12) |
| Medical expenditures (H51) | Differences in nondurable expenditures (D12) |
| Removing medical expenditures (H51) | Difference in consumption decline (E21) |
| Health expenditures (H51) | Consumption (E21) |
| Employment, housing status, and health (I39) | Differences in spending profiles (D12) |