Working Paper: NBER ID: w28329
Authors: Gopi Shah Goda; Jialu Liu Streeter
Abstract: Wealth varies considerably across the population and changes significantly over the lifecycle. In this paper, we trace out trajectories of wealth across several key life milestones, including marriage, homeownership, childbirth, divorce, disability, health shocks, retirement and widowhood using multiple decades of longitudinal panel data. We estimate both changes over the ten-year period before and after each milestone and assess whether those changes occur gradually or sharply after the milestone. We find evidence of significant long-run increases in wealth associated with homeownership and retirement, and significant long-run reductions in wealth associated with divorce, health shocks, and disability. In general, these changes appear to occur gradually rather than immediately after the milestone. Our results also indicate a large degree of heterogeneity across demographics, socioeconomic status and risk protection from insurance. In particular, those with lower levels of socioeconomic status and those without access to risk protection experience smaller wealth gains (or larger wealth losses) following life-course transitions. These results identify populations and life stages where individuals are most vulnerable to large reductions in wealth.
Keywords: No keywords provided
JEL Codes: G51; I13; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Homeownership (R21) | Increased Wealth (D31) |
| Divorce (J12) | Decreased Wealth (E21) |
| Health Shocks (I12) | Decreased Wealth (E21) |
| Disability (J14) | Decreased Wealth (E21) |
| Lower Socioeconomic Status (I14) | Smaller Wealth Gains or Larger Losses (G41) |
| Health Insurance (I13) | Mitigation of Negative Wealth Changes (E21) |
| Retirement Plan Access (J26) | Mitigation of Negative Wealth Changes (E21) |