The Consequences of Disabilities in Late Middle Age for Consumption Well-Being

Emily Wiemers
Associate Professor of Public Administration and International Affairs, Syracuse University
Joe Hotz
Professor of Economics, Duke University

Background: This project will use the rich data in the Panel Study of Income Dynamics (PSID) to examine the consequences of disability in late middle age for economic well-being using consumption-based measures (e.g., food, housing, services) rather than income-based measures. It will exploit the long health histories in the PSID to examine whether declines in consumption at the time an adult becomes disabled are predicted by or mediated by reports of poor health earlier in life, particularly in childhood. The project will address two specific aims:

Aim 1: Examine the impact of the onset of work-limiting disabilities in late middle age on health, non-durable, and non-health service consumption, focusing on spousal labor supply and wealth as sources of smoothing consumption. This aim will recognize that, for married people, there is a tension between providing care to a disabled spouse and increasing labor supply to smooth consumption after the onset of a spouse’s disability.
Aim 2: Examine whether adverse childhood health conditions explain declines in consumption for those experiencing a work-limiting disability in late middle age. Individuals with poor health in childhood may save to insure their consumption against expected future adverse health shocks. Alternatively, they may be unable to self-insure because poor health in childhood limits earnings. Adverse childhood health conditions may also predict the severity of disabilities later in life, even in the absence of insurance effects.