crash and wait the impact of the great recession on the retirement plans of older americans this study uses data from pre and post crash surveys from the cognitive economics study to examine the impact of recent stock and labor market wealth losses on the planned retirement ages of older americans regression estimates imply that the average wealth loss between july 2008 and may june 2009 is associated with an increase in planned retirement age of approximately 2 5 months furthermore pessimism about future stock market returns is found to amplify the impact of wealth losses on retirement timing

a lifecycle perspective of stock market performance and wellbeing we estimate the effect of stock market fluctuations on subjective wellbeing and mental health using australian survey data over the period 2001 2012 which includes the global financial crisis a particular innovation of the paper is the use of three satisfaction measures overall financial employment and the use of a stylised lifecycle investment model these features coupled with a robust identification strategy based on comparing survey respondents interviewed in the same quarter and location allow us to better understand individual reactions to stock market changes we find that stock market increases lead to a significant but modest improvements in life satisfaction and mental health this effect is driven by young and middle aged males and is stronger for those with direct exposure to the stock market for young cohorts the stock market index acts as a leading indicator of employment prospects whilst for older cohorts it acts directly on financial satisfaction

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

estimating the effect of income on health and mortality using lottery prizes as an exogenous source of variation in income a vast literature has established a strong positive relation between income and health status and a negative relation with mortality this paper studies the effects of income on health and mortality using only the part of income variation due to a truly exogenous factor monetary lottery prizes of individuals the findings are that higher income causally generates good health and that this effect is of a similar magnitude as when traditional estimation techniques are used a 10 percent income increase improves health by about 4 5 percent of a standard deviation

the day of the week effect the international evidence abstract we re examine the day of the week effect for eleven indexes from nine countries during the 1969 1992 period the standard methodology as well as the moving average methodology are used and we find returns to be lower at the beginning of the week but not necessarily on monday for the full period as in chang et al international evidence on the robustness of the day of the week effect journal of financial and quantitative analysis 28 1993 497 514 the anomaly disappears for the most recent period in the usa however the effect is still strong for european countries hong kong and toronto

exploring the health wealth nexus the causal links between health and economic resources have long concerned social scientists we use four waves of data from the panel study of income dynamics psid to analyze the impact of wealth upon an individual s health status the difficulty in approaching this task that has bedeviled previous studies is that wealth may be endogenous a priori it is just as likely that changes in health affect wealth as vice versa we argue that inheritance is a suitable instrument for the change in wealth and implement a straightforward instrumental variables strategy to deal with this problem our results suggest that the causal relationship running from wealth to health may not be as strong as first appears in the data wealth exerts a positive and statistically significant effect on health status but it is very small in magnitude instrumental variables estimation leaves the point estimate approximately the same but renders it insignificantly different from zero and even when the point estimate is increased by twice its standard error s e the quantitative effect is small we conclude that the wealth health connection is not driven by short run changes in wealth

macroeconomic conditions and well being do social interactions matter abstractwe investigate the role played by social interactions in the transmission of the effects of macroeconomic conditions on well being using survey data for a representative sample of italian individuals we find that social interactions play a dual role on the one hand the well being of people who spend more time with their friends or go out more often is less sensitive to macroeconomic fluctuations on the other hand social interactions are negatively affected by worsening macroeconomic conditions thus playing a relevant role in the transmission of macroeconomic shocks to subjective well being more specifically the negative impact of downturns on the frequency of going out and active participation in associations significantly contributes to the adverse effects of recessions on satisfaction with life and with individual life domains

economic status and health in childhood the origins of the gradient the well known positive association between health and income in adulthood has antecedents in childhood not only is children s health positively related to household income but the relationship between household income and children s health becomes more pronounced as children age part of the relationship can be explained by the arrival and impact of chronic conditions children from lower income households with chronic conditions have worse health than do those from higher income households the adverse health effects of lower income accumulate over children s lives part of the intergenerational transmission of socioeconomic status may work through the impact of parents income on children s health

health and wealth of elderly couples causality tests using dynamic panel data models a positive relationship between socio economic status ses and health the health wealth gradient is repeatedly found in many industrialized countries this study analyzes competing explanations for this gradient causal effects from health to wealth health causation and causal effects from wealth to health wealth or social causation using six biennial waves of couples aged 51 61 in 1992 from the us health and retirement study we test for causality in panel data models incorporating unobserved heterogeneity and a lag structure supported by specification tests in contrast to tests relying on models with only first order lags or without unobserved heterogeneity these tests provide no evidence of causal wealth health effects on the other hand we find strong evidence of causal effects from both spouses health on household wealth we also find an effect of the husband s health on the wife s mental health but no other effects from one spouse s health to health of the other spouse

life satisfaction dynamics with quarterly life event data using life satisfaction responses from australian panel data we examine the questions of when and to what extent individuals are affected by major positive and negative life events including changes in financial situation marital status death of a close relative and being the victim of crime the key advantage of our data is that we are able to identify these events on a quarterly basis rather than on the yearly basis used by previous studies we find evidence that life events are not randomly distributed that individuals anticipate major events to a large extent and that they fully adapt to many events within 12 months the estimates can be used to calculate monetary values needed to compensate individuals for life events using a new valuation methodology that incorporates these dynamic factors produces considerably smaller compensation valuations than those calculated using the standard approach

the global distribution of income in 2050 summary several recent papers have explored the history of the global income distribution and point to some improvements a falling global gini coefficient a falling poverty rate and falling poverty headcounts this paper uses the simple accounting procedure sap discussed by bhalla bhalla s s 2002 imagine there s no country poverty inequality and growth in the era of globalization washington dc institute for international economics and the international futures model hughes b b hillebrand e e 2006 exploring and shaping international futures boulder co paradigm publishers to project the global distribution of income in 2015 and 2050 the results suggest that unless the oecd countries start growing more slowly than is now commonly assumed or broad swaths of the developing world substantially improve their economic performance beyond that experienced in the last 25 years the global income distribution will soon start to worsen again

petrol prices and subjective wellbeing abstract we examine the effect of petrol prices on subjective wellbeing swb using household panel data to do so we use 17 waves of the household income and labour dynamics in australia hilda survey based on our preferred instrumental variable estimates we find that a standard deviation increase in petrol prices leads to a decline of 0 0157 0 0245 standard deviations in swb the finding that increases in petrol prices significantly lower swb is robust to alternative measures of wellbeing and alternative ways of addressing endogeneity as well as employing different sources of fuel price data measured at a range of frequencies we also examine the channels through which petrol prices influence swb and find that maintaining social networks is an important way through which petrol prices influence swb

distributional consequences of globalisation empirical evidence from panel data abstract this paper investigates the impact of globalisation on cross country inequality using a large panel dataset the findings reveal that location and capital are the main determinants of inequality trade intensity and foreign direct investment make only a small contribution approximately 4 the relative contributions of trade and foreign direct investment to inequality have changed little over time and have certainly not increased at the same rate as the rise in global trade and investment activity hence globalisation does not emerge as a significant factor in driving cross country inequality differences emerge when countries are grouped by relative income but the main findings persist

what do we know about global income inequality in this paper we review the recent literature on global interpersonal income inequality while all estimates agree that the level is very high with a gini of between 0 630 and 0 686 in the 1990s there is no consensus regarding the direction of change we discuss methodological issues including the use of national accounts versus survey based estimates of mean income or consumption and the choice of purchasing power parity exchange rates findings of a rise or fall in global income inequality are not robust across different estimation methods and datasets given the diversity of estimates and various sources of uncertainty including gaps and errors in the underlying data we conclude there is insufficient evidence to determine the direction of change in global interpersonal inequality in recent decades

the valuation of fdic deposit insurance using option pricing estimates when congress set the premium rate for fdic deposit insurance in the banking act of 1935 which authorized a permanent federal insurance system neither experience nor theory could offer much guidance regarding an appropriate fee structure although rates have since been periodically revised the fdic has yet to attempt to set the insurance rate at a ifair level that is a level equal to administrative costs plus the ex ante value of the insurance such a premium is the rate that would be charged by competitive private insurers however7 the garn st germain act of 1982 directed the fdic to consider the feasibility of a risk based premium structure in response the fdic has suggested a trial system in which each insured bank will be placed in one of three risk classes based on credit and interest rate risk relative to capital and a premium rate will be assigned to each group those rates will be determined in part by the loss experience of the entire banking system fdic 1983 another approach to the determination of the appropriate insurance premium has been offered by merton 1977 who suggested using the analogous relationship between deposit guarantees and put options to value fdic insurance in this paper we follow merton s suggestion and calculate bank specific estimates of the proper premium for deposit insurance for the banks in our sample we find that fdic rates greatly exceed estimates of the fair value of the insurance derived from the blackscholes 1972 option pricing model

option pricing when the variance is changing the monte carlo method is used to solve for the price of a call when the variance is changing stochastically

the impact of income shocks on health evidence from cohort data we study the eect of permanent income innovations on health for a prime aged population using information on more than half a million individuals sampled over a twenty five year period in three dierent cross sectional surveys we aggregate data by date of birth cohort to construct a synthetic cohort dataset with details of income expenditure socio demographic factors health outcomes and selected risk factors we then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal eects of permanent income shocks on health we find that such income innovations have little eects on health but do aect health behaviour and mortality

accounting for the recent decline in global income inequality following nearly two centuries of growth global income inequality declined in the last decades of the 20th century to determine the causes of that historic decline we focus on income inequality across nations and find that the major equalizing force is faster than world average income growth in china and south asia industrializing regions where 40 of the world s people live apparently what matters most about economic globalization thus far is its role in the spread of industrialization throughout populous poor regions of the world if so then globalization most likely has reduced global income inequality this decline is anticipated to continue over the next few decades first because of the continued industrialization of poor regions and second because most of the growth in the world s working age population will occur in poor regions

psychological expected utility theory and anticipatory feelings we extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty we show how these anticipatory feelings may result in time inconsistency we provide an example from portfolio theory to illustrate the potential impact of anticipation on asset prices

recession depression mental health effects of the 2008 stock market crash do sudden large wealth losses affect mental health we use exogenous variation in the interview dates of the 2008 health and retirement study to assess the impact of large wealth losses on mental health among older u s adults we compare cross wave changes in wealth and mental health for respondents interviewed before and after the october 2008 stock market crash we find that the crash reduced wealth and increased feelings of depression and use of antidepressant drugs and that these effects were largest among respondents with high levels of stock holdings prior to the crash these results suggest that sudden wealth losses cause immediate declines in subjective measures of mental health however we find no evidence that wealth losses lead to increases in clinically validated measures of depressive symptoms or indicators of depression

stock market crash and expectations of american households this paper utilizes data on subjective probabilities to study the impact of the stock market crash of 2008 on households expectations about the returns on the stock market index we use data from the health and retirement study that was fielded in february 2008 through february 2009 the effect of the crash is identified from the date of the interview which is shown to be exogenous to previous stock market expectations we estimate the effect of the crash on the population average of expected returns the population average of the uncertainty about returns subjective standard deviation and the cross sectional heterogeneity in expected returns disagreement we show estimates from simple reduced form regressions on probability answers as well as from a more structural model that focuses on the parameters of interest and separates survey noise from relevant heterogeneity we find a temporary increase in the population average of expectations and uncertainty right after the crash the effect on cross sectional heterogeneity is more significant and longer lasting which implies substantial long term increase in disagreement the increase in disagreement is larger among the stockholders the more informed and those with higher cognitive capacity and disagreement co moves with trading volume and volatility in the market

globalisation and economic growth a historical perspective this paper reviews the historical evidence on the relationship between globalisation and economic growth divergence in the growth of income and industrialisation in the twentieth century is documented but it is also noted that international income inequality appears to have decreased since about 1870 and that long run trends in the human development index are much less pessimistic about the experience of developing countries it is argued that trade liberalisation has been good for growth on average but that successful capital liberalisation requires high institutional quality and that the developmental state may have an important role to play in the early stages of development the recent claim by robert lucas that the 21st century will see a massive reduction in income inequality across countries in a globalised world economy is sceptically discussed in the context of empirical evidence that bad institutions are often persistent and that geography is still a major factor in explaining international income differences

market valuation of bank assets and deposit insurance in canada we examine a sample of canadian banks and use option pricing theory to infer the market value of a bank s assets from the observed market value and volatility of its equity we find that market value estimates are significantly different from corresponding book values these differences vary significantly across banks suggesting that market values provide bank specific information not found in book values we also derive that risk adjusted deposit insurance premia for these banks our results suggest that the current fixed rate deposit insurance premium system has resulted in significant