Abstract
We develop a two-part high-dimensional Bayesian modelling approach to analyse the relationship between saving behaviour and health. In contrast to the existing literature, our approach allows different data-generating processes for the decision to save and the amount saved, and therefore unveils a more detailed picture of the relationship between financial behaviour and health than previous work. We explore different measures of saving, including monthly saving behaviour and the stock of financial assets held. Further, we exploit British panel data, which includes an extensive range of biomarkers. Our second contribution lies in comparing the effects of these objective measures of health with commonly used self-assessed health measures. We find that health is a significant determinant of saving behaviour and financial asset holding, and that biomarker measures have differential impacts on saving behaviour compared to self-reported health measures.
Highlights
Introduction and backgroundSaving behaviour has attracted extensive interest in the economics literature, with the motivations for saving being explored from theoretical and empirical perspectives
Our results show that self-reported health measures are an important determinant of financial behaviours in Britain, with better self-assessed health (SAH) and SF-12 scores being positively associated with both the decision to save and the amount saved on a monthly basis
We explore the influence of health status on the stock of financial assets held (Table 6), and, we estimate a joint model of financial asset and debt holding based on the copula approach detailed above (Table 7)
Summary
Saving behaviour has attracted extensive interest in the economics literature, with the motivations for saving being explored from theoretical and empirical perspectives (see Browning and Lusardi 1996, for a comprehensive review of the literature on household saving). Lusardi (1998), who explores a sample of individuals from the first wave of the US Health and Retirement Survey, reports evidence in line with the theory of precautionary saving, suggesting that individuals who face higher income risk save more. DeVaney, Anong, and Whirl (2007) use data from the 2001 Survey of Consumer Finances (SCF) to explore a hierarchy of savings motives derived from Maslow’s hierarchy of needs (Maslow 1943) They find that health is a significant factor at lower levels of the hierarchy, progressing from basic needs to safety needs, but not at higher levels, when saving is related to, for example, esteem and self-actualisation.
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