Life cycle behavior under uncertainty: Essays on savings, mortgages and health

Raun van Ooijen

Life cycle behavior under uncertainty: Essays on savings, mortgages and health

Raun van Ooijen

Economics, Econometrics and Finance

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De financiële crisis van 2007-2008 maakt duidelijk dat onzekerheid er toe doet. De sterke daling in aandelen- en huizenprijzen, in combinatie met riskante hypotheekleningen, heeft een grote invloed op de financiële positie van huishoudens. Het doel van dit proefschrift is te achterhalen in welke mate onzekerheid het financiële keuzegedrag van huishoudens beïnvloedt, zoals het spaargedrag en de aanschaf van financiële producten zoals een hypotheek.

Wij laten zien dat de onzekerheid omtrent toekomstig beleid met betrekking tot een hervorming van de hypotheekrenteaftrek ervoor zorgt dat huishoudens meer gaan sparen om mogelijke financiële tegenvallers op te vangen. Wij tonen vervolgens aan dat huishoudens die minder kennis hebben van hypotheekleningen, geneigd zijn om een minder riskante hypotheeklening af te sluiten, tenzij zij gebruik maken van een tussenpersoon.

Uit een analyse van gedetailleerde belastinggegevens blijkt dat ouderen gemiddeld gezien vermogend zijn, maar hun spaargeld nauwelijks aanspreken, zelfs niet op een zeer hoge leeftijd. Deze bevinding is in tegenspraak met de economische levenscyclustheorie en kan niet worden verklaard door onzekerheid over toekomstige inkomsten of gezondheidsuitgaven. De gezondheidstoestand speelt wel een belangrijke rol om verschillen in besparingen tussen huishoudens te verklaren.

Op basis van door mensen zelf ervaren gezondheidstoestand en objectieve gezondheidskenmerken uit medische registers laten wij zien dat gezondheid meer persistent is en sneller afneemt op oudere leeftijd dan kan worden geconcludeerd op basis van enkel gerapporteerde gezondheid. Tot slot tonen wij aan dat in het bijzonder mentale gezondheidsproblemen in combinatie met een ongezonde levensstijl (roken en overgewicht) het risico op langdurige arbeidsongeschiktheid onder zelfstandigen vergroot.

Originele taal-2	English
Kwalificatie	Doctor of Philosophy
Toekennende instantie	Rijksuniversiteit Groningen
Begeleider(s)/adviseur	Alessie, Rob, Supervisor Kalwij, A.S., Co-supervisor, Externe Persoon
Datum van toekenning	21-jan.-2016
Plaats van publicatie	[Groningen]
Uitgever	University of Groningen, SOM research school
Gedrukte ISBN's	978-90-367-8585-3
Elektronische ISBN's	978-90-367-8584-6
Status	Published - 2016

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title = "Life cycle behavior under uncertainty: Essays on savings, mortgages and health",

abstract = "Households must take into account various sources of uncertainty when making financial decisions. In the aftermath of the financial crisis of 2007-2008 some of these uncertainties have increased and, arguably, households may have become more aware of the uncertainties they encounter. The purpose of this thesis is to examine to what extent different sources of uncertainty influence household financial decision making, in particular regarding saving, portfolio choice and the choice of financial products such as mortgages.We show that uncertainty related to the outcome of future policies (limiting the mortgage interest deduction) induce households to save more than optimal to absorb possible financial setbacks. We further demonstrate that financially less sophisticated households, who do not fully understand the complex nature of mortgage loans, tend to choose less risky mortgages, unless they consult a mortgage broker.Using detailed tax records, we provide evidence that elderly households are on average wealthy, but do not dissave. This contrasts with the prediction of the life-cycle theory of saving and cannot be explained by uncertainty regarding income or out-of-pocket medical expenses. Health plays an important role in explaining differences in wealth between households.Using self-reported health combined with objective health measures from medical records, we show that health is more persistent and deteriorates at a faster rate in old age than can be inferred from subjective health measures alone. We further show that mental ill-health combined with an unhealthy lifestyle (smoking and being overweight) is a major contributor to long-term sickness among self-employed (with income insurance).",

author = "{van Ooijen}, Raun",

year = "2016",

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N2 - Households must take into account various sources of uncertainty when making financial decisions. In the aftermath of the financial crisis of 2007-2008 some of these uncertainties have increased and, arguably, households may have become more aware of the uncertainties they encounter. The purpose of this thesis is to examine to what extent different sources of uncertainty influence household financial decision making, in particular regarding saving, portfolio choice and the choice of financial products such as mortgages.We show that uncertainty related to the outcome of future policies (limiting the mortgage interest deduction) induce households to save more than optimal to absorb possible financial setbacks. We further demonstrate that financially less sophisticated households, who do not fully understand the complex nature of mortgage loans, tend to choose less risky mortgages, unless they consult a mortgage broker.Using detailed tax records, we provide evidence that elderly households are on average wealthy, but do not dissave. This contrasts with the prediction of the life-cycle theory of saving and cannot be explained by uncertainty regarding income or out-of-pocket medical expenses. Health plays an important role in explaining differences in wealth between households.Using self-reported health combined with objective health measures from medical records, we show that health is more persistent and deteriorates at a faster rate in old age than can be inferred from subjective health measures alone. We further show that mental ill-health combined with an unhealthy lifestyle (smoking and being overweight) is a major contributor to long-term sickness among self-employed (with income insurance).

AB - Households must take into account various sources of uncertainty when making financial decisions. In the aftermath of the financial crisis of 2007-2008 some of these uncertainties have increased and, arguably, households may have become more aware of the uncertainties they encounter. The purpose of this thesis is to examine to what extent different sources of uncertainty influence household financial decision making, in particular regarding saving, portfolio choice and the choice of financial products such as mortgages.We show that uncertainty related to the outcome of future policies (limiting the mortgage interest deduction) induce households to save more than optimal to absorb possible financial setbacks. We further demonstrate that financially less sophisticated households, who do not fully understand the complex nature of mortgage loans, tend to choose less risky mortgages, unless they consult a mortgage broker.Using detailed tax records, we provide evidence that elderly households are on average wealthy, but do not dissave. This contrasts with the prediction of the life-cycle theory of saving and cannot be explained by uncertainty regarding income or out-of-pocket medical expenses. Health plays an important role in explaining differences in wealth between households.Using self-reported health combined with objective health measures from medical records, we show that health is more persistent and deteriorates at a faster rate in old age than can be inferred from subjective health measures alone. We further show that mental ill-health combined with an unhealthy lifestyle (smoking and being overweight) is a major contributor to long-term sickness among self-employed (with income insurance).

M3 - Thesis fully internal (DIV)

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PB - University of Groningen, SOM research school

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