Essays on Elderly Decision Making

The dissertation consists of two studies on decision making of the elderly in India and the United States. The first study uses data from the India Human Development Survey (IHDS), a nationally representative survey in India, to examine the effect of pension on the health and labor market decisions of individuals above 50 years. The study also examines its effect on the health of young children living with the pension beneficiaries. In particular, I examine the impact of the 2011 expansion of the Indira Gandhi National Old Age Pension Scheme on the labor and health outcomes of the elderly and co-residing grandchildren. The results suggest that elderly men and women work less as a result of pension from this program, with no detectable impact on their health status. I also compare the oldest individual above and below the state cutoff and those before and after the pension expansion, to find that children aged 0 to 5 years living with their grandmothers have better health than those living with grandfathers. The second study explores the relationship between home equity and risk preferences of individuals above 50 year using the restricted panel dataset of the Health and Retirement Study between 1992 and 2014. Risk aversion is measured using hypothetical income gamble questions asked every two years between 1998 and 2006. I also examine the effect of home equity on portfolio allocation of these individuals. Following earlier literature, I de fine home equity as the difference between self-reported property value and mortgage, and use the zip code level housing prices to examine the causal relationship between home equity and risk aversion. The results suggest that an increase in home equity decreases risk aversion, but the effect is not significant.