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Endogenous health groups and heterogeneous dynamics of the elderly

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  • Dante Amengual
  • Jesús Bueren
  • Julio A. Crego

Abstract

We propose a methodology to classify individuals into few but meaningful health groups by estimating a panel Markov switching model that exploits rich information from panel household surveys. Using the HRS, we identify four persistent health groups, depending on individual's physical and mental disabilities. Our classification outperforms existing health measures at explaining entry in nursing homes, home health care, out‐of‐pocket medical expenses, and mortality for individuals in the HRS, ELSA, and SHARE. Through a workhorse model of savings, we recover an asset cost of bad health that is twice as big as when using self‐reported health.

Suggested Citation

  • Dante Amengual & Jesús Bueren & Julio A. Crego, 2021. "Endogenous health groups and heterogeneous dynamics of the elderly," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(7), pages 878-897, November.
    • Handle: RePEc:wly:japmet:v:36:y:2021:i:7:p:878-897
    DOI: 10.1002/jae.2842
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    Cited by:

    1. Jesus Bueren, 2023. "Long-Term Care Needs and Savings in Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 201-224, July.
    2. Alejandra Marroig, 2023. "Transitions across states with and without difficulties in performing activities of daily living and death: a longitudinal comparison of ten European countries," European Journal of Ageing, Springer, vol. 20(1), pages 1-12, December.
    3. Hoskins, Stephen & Johnston, David W. & Kunz, Johannes S. & Shields, Michael A. & Staub, Kevin E., 2024. "Heterogeneity in the Persistence of Health: Evidence from a Monthly Micro Panel," IZA Discussion Papers 17023, Institute of Labor Economics (IZA).

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