Hispanic Household Economic Decisions
Friday, Jan. 6, 2017 3:15 PM – 5:15 PM
- Chair: Joseph Guzman, Michigan State University
Understanding the Racial/Ethnic Gap in Bank Account Ownership Among Older Adults
AbstractWe investigate what factors contribute to the racial/ethnic gap in bank account ownership among older adults. We draw a sample of individuals age 51-90 from the Health and Retirement Study (HRS) observed over the period 2000-2012. We employ panel data estimation techniques and the Blinder-Oaxaca (BO) decomposition to identify and assess the importance of barriers preventing minority groups, specifically Blacks and Hispanics, from accessing financial services. We document that minority older adults are significantly less likely to own a bank account than their White counterparts. This gap is substantially larger for Hispanics than for Blacks. Among the determinants of such gap, we find that health, cognitive ability, being foreign born and legal immigration status (proxied by the consent for sharing Social Security number with HRS) play a limited role explaining the gap for both minority groups. On the other hand, lack of English proficiency accounts for most of the difference in bank account ownership between Whites and Hispanics. The BO decomposition reveals that, altogether, factors such as health, cognitive ability and cultural barriers increase the ability of the model to explain differential bank account ownership by approximately 30% for Hispanics and 15% for Blacks. We also show that the mediating effect of these factors is heterogeneous and varies with the socio-economic status characteristics of the neighborhood as well as with the levels of income and wealth of the household.
How Children With Disabilities Affect Household Investment Decisions
AbstractWe analyze how children with mental disabilities influence parental portfolio allocation. We find that risky asset holding decreases among households with special needs children. However, conditional on participating in the market, households with special needs children invest a larger portion of their wealth in risky assets. As risky asset holding is a key component of wealth building, these findings have important implications for both policy and household wealth inequality.
Consumption Smoothing and Frequency of Benefit Payments of Cash Transfer Programs
AbstractAccording to the Life Cycle Hypothesis (LCH), an individual smoothes marginal utility of consumption across periods to maximize utility during his or her life span. There is a large literature that has found that predictable changes in income should not affect consumption (e.g. Hall, 1978). However, various studies have documented that individuals or households with little savings do not smooth their consumption between social security checks. Rather, consumption tends to peak when the check arrives and then falls until the arrival of the next check. This pattern is found both for expenditures (Stephens, 2003; Stephens, 2006) and for caloric intake (Shapiro, 2005; Mastrobuoni and Weinberg, 2009). According to the LCH, frequency of benefits payments should not affect consumption smoothing between paychecks. We exploit a rich panel data set equivalent to the Health and Retirement Survey (HRS) to examine the extent of consumption smoothing between paychecks among elderly households in the noncontributory pension program disbursed every month and every two months. We also analyze the effects of the programs on household food expenditure, durables, health care, food availability, labor supply, family transfers, and subjective wellbeing. We find that the monthly program seems to be more effective on smoothing food expenditure than the bimonthly program. Compared to the bimonthly program, the monthly program increased doctor visits, reduced the incidence of hunger spells, and lessened the need for support from charities. Under the bimonthly program, expenditures on food and beverages significantly decreased near the end of the pay-cycle, while in comparison with the monthly program ownership of durable goods are higher. The results suggest that frequency of benefit payments is an important design feature of social programs.
- I0 - General
- J1 - Demographic Economics