Research
I am an applied economist with research interests in labor economics, health economics, and the economics of aging.
Working Papers
Do Potential future health shock keep older americans from using their housing equity
DRAFT: JUNE 13, 2019
Many retirees retain their housing equity until they die and do not utilize it to help finance spending on consumption. In this paper, I examine how older Americans (age 55+) may use their house as a form of precautionary savings in the event they face an increase in out-of-pocket medical expenses due to a health shock. I find that households are 12-percentage points more likely to own a home in their late retirement years if they might face an unexpected increase in medical bills, indicating that many of such households prefer not to own but choose to knowing they may get sick and face an increase in out-of-pocket medical expenses. Accordingly, I propose an insurance policy that would cover any out-of-pocket medical expenses not covered by Medicare. When the price of the insurance policy is between 0.15%-0.50% of each household’s house value, 12.8% of households purchase the insurance policy. In the presence of an insurance policy and health shocks, the homeownership and moving rates look like an economy without health shocks, thus correcting a possible market failure that causes households to use their house as a form of precautionary savings.
Defined benefit Plans and Homeownership in the Post-Great Recession Era
DraFt: June 13, 2019
While housing equity accounts for a large portion of many retiree’s savings portfolios, they are not using their equity to increase consumption in retirement as suggested by the Life-Cycle Hypothesis. Defined benefit plans provide a guaranteed source of income in retirement where the household bears no risk, whereas households with a defined contribution plan are subject to potential risk depending on their asset allocation. This paper examines whether having a defined benefit plan mitigated some of the effects of the Great Recession. Using a difference-in-difference analysis, I examine the impact of the Great Recession on homeownership between households with a defined benefit plan compared to those with a defined contribution plan. I find that households with a defined contribution plan were 2.1-2.9 percent less likely to own a home after the Great Recession compared to households with a defined contribution plan. It is possible that households with defined contribution plans were willing to forgo homeownership to offset some of the losses experienced from the Great Recession. Future retirees face a potentially riskier housing market and are less likely to have a defined benefit plan. As a result, future retirees may be more willing to use their housing equity to increase consumption in retirement than was observed in past generations.
Home Maintenance and housing disinvestment among older americans (with Richard Dunn)
Understanding why Americans do not use their housing equity in retirement has been the focus of extensive research. There has been some evidence to suggest that homes owned by older Americas appreciate at a slower rate than younger households and that this might be due in part to a decrease in spending on maintenance. Using the Health and Retirement Study, this paper builds on previous research by showing that the time older homeowners spend performing maintenance themselves is important to consider alongside spending when looking at how much older homeowners are reducing their investment in maintenance. Households disinvest as much as $43,000 between the ages of 65-84 by decreasing time and spending on maintenance, which amounts to around $2,150 annually that could be used to increase consumption spending in retirement. Failing to account for the value of time spent on home maintenance would lead to a 30 percent understatement of the true value of disinvestment. While this is a significant amount of money disinvested from the home, questions arise as to why other alternatives, such as a reverse mortgage, that yield even more money towards potential retirement use, are not pursued more often.