Modeling old-age wealth with endogenous early-life outcomes

The case of Mexico

Deborah S. DeGraff, Rebeca Wong

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper contributes to the literature on the life course and aging by examining the association between early-life outcomes and late-life well being, using data from the Mexican Health and Aging Study. Empirical research in this area has been challenged by the potential endogeneity of the early-life outcomes of interest, an issue which most studies ignore or downplay. Our contribution takes two forms: (1) we examine in detail the potential importance of two key life-cycle outcomes, age at marriage (a measure of family formation) and years of educational attainment (a measure of human capital investment) for old-age wealth, and (2) we illustrate the empirical value of past context variables that could help model the association between early-life outcomes and late-life well being. Our illustrative approach, matching macro-level historical policy and census variables to individual records to use as instruments in modeling the endogeneity of early-life behaviors, yields a statistically identified two-stage model of old-age wealth with minimum bias. We use simulations to show that the results for the model of wealth in old age are meaningfully different when comparing the approach that accounts for endogeneity with an approach that assumes exogeneity of early-life outcomes. Furthermore, our results suggest that in the Mexican case, models which ignore the potential endogeneity of early-life outcomes are likely to under-estimate the effects of such variables on old-age wealth.

Original languageEnglish (US)
Pages (from-to)58-70
Number of pages13
JournalJournal of the Economics of Ageing
Volume3
DOIs
StatePublished - 2014

Fingerprint

old age
Mexico
well-being
family formation
capital investment
macro level
life cycle
human capital
empirical research
census
marriage
simulation
Modeling
Old age
Wealth
trend
health
Values
Endogeneity

Keywords

  • Life-cycle models
  • Mexico
  • Old-age wealth

ASJC Scopus subject areas

  • Life-span and Life-course Studies
  • Economics and Econometrics

Cite this

Modeling old-age wealth with endogenous early-life outcomes : The case of Mexico. / DeGraff, Deborah S.; Wong, Rebeca.

In: Journal of the Economics of Ageing, Vol. 3, 2014, p. 58-70.

Research output: Contribution to journalArticle

@article{ec22bf1e51bd40a5a8423bdd16fc9085,
title = "Modeling old-age wealth with endogenous early-life outcomes: The case of Mexico",
abstract = "This paper contributes to the literature on the life course and aging by examining the association between early-life outcomes and late-life well being, using data from the Mexican Health and Aging Study. Empirical research in this area has been challenged by the potential endogeneity of the early-life outcomes of interest, an issue which most studies ignore or downplay. Our contribution takes two forms: (1) we examine in detail the potential importance of two key life-cycle outcomes, age at marriage (a measure of family formation) and years of educational attainment (a measure of human capital investment) for old-age wealth, and (2) we illustrate the empirical value of past context variables that could help model the association between early-life outcomes and late-life well being. Our illustrative approach, matching macro-level historical policy and census variables to individual records to use as instruments in modeling the endogeneity of early-life behaviors, yields a statistically identified two-stage model of old-age wealth with minimum bias. We use simulations to show that the results for the model of wealth in old age are meaningfully different when comparing the approach that accounts for endogeneity with an approach that assumes exogeneity of early-life outcomes. Furthermore, our results suggest that in the Mexican case, models which ignore the potential endogeneity of early-life outcomes are likely to under-estimate the effects of such variables on old-age wealth.",
keywords = "Life-cycle models, Mexico, Old-age wealth",
author = "DeGraff, {Deborah S.} and Rebeca Wong",
year = "2014",
doi = "10.1016/j.jeoa.2013.11.002",
language = "English (US)",
volume = "3",
pages = "58--70",
journal = "Journal of the Economics of Ageing",
issn = "2212-828X",
publisher = "Elsevier BV",

}

TY - JOUR

T1 - Modeling old-age wealth with endogenous early-life outcomes

T2 - The case of Mexico

AU - DeGraff, Deborah S.

AU - Wong, Rebeca

PY - 2014

Y1 - 2014

N2 - This paper contributes to the literature on the life course and aging by examining the association between early-life outcomes and late-life well being, using data from the Mexican Health and Aging Study. Empirical research in this area has been challenged by the potential endogeneity of the early-life outcomes of interest, an issue which most studies ignore or downplay. Our contribution takes two forms: (1) we examine in detail the potential importance of two key life-cycle outcomes, age at marriage (a measure of family formation) and years of educational attainment (a measure of human capital investment) for old-age wealth, and (2) we illustrate the empirical value of past context variables that could help model the association between early-life outcomes and late-life well being. Our illustrative approach, matching macro-level historical policy and census variables to individual records to use as instruments in modeling the endogeneity of early-life behaviors, yields a statistically identified two-stage model of old-age wealth with minimum bias. We use simulations to show that the results for the model of wealth in old age are meaningfully different when comparing the approach that accounts for endogeneity with an approach that assumes exogeneity of early-life outcomes. Furthermore, our results suggest that in the Mexican case, models which ignore the potential endogeneity of early-life outcomes are likely to under-estimate the effects of such variables on old-age wealth.

AB - This paper contributes to the literature on the life course and aging by examining the association between early-life outcomes and late-life well being, using data from the Mexican Health and Aging Study. Empirical research in this area has been challenged by the potential endogeneity of the early-life outcomes of interest, an issue which most studies ignore or downplay. Our contribution takes two forms: (1) we examine in detail the potential importance of two key life-cycle outcomes, age at marriage (a measure of family formation) and years of educational attainment (a measure of human capital investment) for old-age wealth, and (2) we illustrate the empirical value of past context variables that could help model the association between early-life outcomes and late-life well being. Our illustrative approach, matching macro-level historical policy and census variables to individual records to use as instruments in modeling the endogeneity of early-life behaviors, yields a statistically identified two-stage model of old-age wealth with minimum bias. We use simulations to show that the results for the model of wealth in old age are meaningfully different when comparing the approach that accounts for endogeneity with an approach that assumes exogeneity of early-life outcomes. Furthermore, our results suggest that in the Mexican case, models which ignore the potential endogeneity of early-life outcomes are likely to under-estimate the effects of such variables on old-age wealth.

KW - Life-cycle models

KW - Mexico

KW - Old-age wealth

UR - http://www.scopus.com/inward/record.url?scp=84905564495&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84905564495&partnerID=8YFLogxK

U2 - 10.1016/j.jeoa.2013.11.002

DO - 10.1016/j.jeoa.2013.11.002

M3 - Article

VL - 3

SP - 58

EP - 70

JO - Journal of the Economics of Ageing

JF - Journal of the Economics of Ageing

SN - 2212-828X

ER -