Working Paper: NBER ID: w25661
Authors: Margherita Borella; Mariacristina De Nardi; 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.
Keywords: non-college educated; economic outcomes; lifecycle model; wages; medical expenses; life expectancy
JEL Codes: E21; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| observed changes in wages (J31) | labor supply of men (J20) |
| observed changes in wages (J31) | labor supply of women (J21) |
| decrease in life expectancy (J17) | retirement savings (D14) |
| increase in out-of-pocket medical expenses (H51) | retirement savings (D14) |
| welfare losses (D69) | lower wages (J31) |
| welfare losses (D69) | shorter life expectancies (I14) |
| welfare losses (D69) | higher medical expenses (H51) |
| observed changes in wages (J31) | welfare losses (D69) |
| decrease in life expectancy (J17) | welfare losses (D69) |
| increase in out-of-pocket medical expenses (H51) | welfare losses (D69) |