Three essays on retirement wealth.

One of the central questions in economics is what motivates savings. This question is important for a number of reasons, one of which is it provide a benchmark for evaluating whether households are financially prepared for retirement. This is particularly relevant given the aging of the baby boom cohort, where the anticipated surge in the number of elderly persons could exert considerable pressure on the budgets of existing government programs. My dissertation includes three essays that focus on some of the current themes in the ongoing debate over the motivation for savings. The first essay focuses on the tendency among the elderly to hold onto their homes and examines whether this behavior is consistent with the notion that housing wealth is insurance against out-of-pocket medical expenses in retirement. I find that housing sales for single households is mostly driven by worsening health and it suggests that homeowners are selling because of a change in demand for housing services. Among married households, there are indications that some households are selling in order to access housing equity; however, the magnitude of the effect is very small. Taken together, the evidence does not lend much validity to the insurance story. The second essay examines the effect of uncertain nursing home expenses in retirement on savings behavior. Using differences in differences, I find that households with lower exposure to nursing home expenses accumulate lower retirement wealth. The results suggest that households are responsive to the incentives embedded in the Medicaid program and they are forward-looking in their savings decisions. The third essay focuses on the tendency among parents to leave equal inheritances to all their children. The paper examines the pattern of bequest giving and attempts to draw a picture of what motivates bequests. I find that the larger the differences among children, the more likely the decedent deviates from equal giving. These differences include differences in children's resources and differences in time assistance to parents. Among decedents that choose unequal division, bequests appear to be motivated by exchange. Among decedents that choose equal division, bequests are consistent with altruist preferences.Ph.D.EconomicsGerontologySocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/125531/2/3192806.pd