An Examination of the Impact of Health on Families' Financial Status

Project Details

Description

This award was provided as part of NSF's Social, Behavioral and Economic Sciences Postdoctoral Research Fellowships (SPRF) program. The goal of the SPRF program is to prepare promising, early career doctoral-level scientists for scientific careers in academia, industry or private sector, and government. SPRF awards involve two years of training under the sponsorship of established scientists and encourage Postdoctoral Fellows to perform independent research. NSF seeks to promote the participation of scientists from all segments of the scientific community, including those from underrepresented groups, in its research programs and activities; the postdoctoral period is considered to be an important level of professional development in attaining this goal. Each Postdoctoral Fellow must address important scientific questions that advance their respective disciplinary fields. A theme that is evident in the literature is that disparities in health affect other social outcomes, including the disparities in financial wealth. The NSF mission emphasizes the need for research that can advance the national health, prosperity and welfare. This project responds to this call by using data from the Panel Study of Income Dynamics (PSID) to examine the conventional wisdom on the link between health status and the financial basket. Explorations on the link between mental/physical health of the person and financial basket (aka portfolio allocation, i.e. portion of household wealth allocated to stocks, bonds, mutual funds) is a relatively new line of inquiry. In previous research, however, the focus is only on the health status of the individual or head of the household. Such a focus on the individual may in fact underestimate the full extent of health on portfolio allocation. This project improves upon existing knowledge and focuses on connections between the health status of the head of household and their siblings, parents and grandparents. The extended family can contribute as a positive or negative social force to the well being of a household. Previous research indicates that economic hardship in the family tree, e.g. among siblings and parents, helps to undermine the ability of middle-class households to accumulate net wealth, and it substantially lowers the probability of carrying stocks or a bank account in their portfolio. Middle-class black households, in particular, are far more likely to have relatives that face such hardship. What is more, previous investigations find that relatively younger and elderly black households tend to devote a much lower proportion of their assets to risky investments, e.g. stocks and mutual funds, compared to their white counterparts. These scholars do not, however, consider the forces behind such disparity.

The underlying hypothesis of this project is that sickness in the family tree may be a unique contributor to the black-white disparity in portfolio selection. To test this proposition, this project relies on perspectives and statistical methods used by Bogan et al (2013). One empirical model that the project uses is the logistic regression for binary data. The logistic regression is a model that can estimate the weight of health status in the family on ownership of a particular asset type, e.g. wealth ownership of stocks, bank account, mutual funds. Another model that this project proposes to run is the tobit model. A tobit model is appropriate because it can estimate the impact of health on the share of wealth allocated to a particular financial asset. Bogan et al (2013) estimate the influence of self-reported health status on household wealth by using a tobit regression model. If after controlling for income, education, etc., certain demographics appear to have lower wealth prospects due to illness in the extended family, such inequality needs to be made known. Potentially, this project could draw attention to the disproportionate effect that health status in the family tree has on different demographics and why certain assets are not contained in an individual's portfolio.

StatusFinished
Effective start/end date9/1/178/31/18

Funding

  • National Science Foundation: $69,000.00

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