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- Title
HETEROGENEITY IN STATE-DEPENDENT UTILITY: EVIDENCE FROM STRATEGIC SURVEYS.
- Authors
Brown, Jeffrey R.; Goda, Gopi Shah; McGarry, Kathleen
- Abstract
A standard result of life-cycle models under uncertainty is that optimizing individuals equate the expected marginal utility of consumption across states of the world if insurance is available at actuarially fair rates. A small empirical literature has suggested that the marginal utility of consumption is lower in less healthy states. We use a novel survey-based measure to document significant heterogeneity in health-state dependence across individuals largely orthogonal to standard controls. We further show that individuals value unhealthy states of the world more when facing work-limiting disabilities than when facing disabilities requiring long-term care, and when facing physical rather than mental disabilities. ( JEL D12, I10)
- Subjects
UNITED States; LIFE cycle hypothesis (Economic theory); MARGINAL utility; CONSUMPTION (Economics); HETEROGENEITY; TWENTY-first century; UNITED States economy
- Publication
Economic Inquiry, 2016, Vol 54, Issue 2, p847
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.12313