Dataset Information

Impact of the 2008 Recession on Wealth-Adjusted Income and Inequality for U.S. Cohorts.

ABSTRACT:

Objective

To examine the distributional effects of the 2008 recession and subsequent recovery across generational cohorts.

Methods

Using data from the Survey of Consumer Finances (2007-2016), we constructed a measure of economic well-being accounting for income, household size, and annuitized value of assets. We examine trajectories of adjusted income and inequality, using Gini coefficients and income shares by decile, for the overall population and by cohort during the recession and recovery.

Results

Inequality declined temporarily during the recession, but reached new highs during the recovery. During recovery, population-level increases in economic resources were not reflected among below-median households, as the more concentrated financial assets rose while broader-based home equity and employment fell or remained stagnant. Inequality measures increased for cohorts in their primary working years (Generation-X and Baby Boomers), but not among the younger Millennials, who were at early stages of education, workforce entry, and household formation.

Discussion

The study illustrates an integrative approach to analyzing cumulative dis/advantage by considering interactions between historically consistent macrolevel events, such as economic shocks or policy choices affecting all cohorts, and the persistent life-course processes that tend to increase heterogeneity and inequality as cohorts age over time. Although recovery policies led to rapid recovery of financial asset values, they did not proportionately reach those below the median or their economic resource types. Results suggest that in a high-inequality environment, recovery policies from economic shocks may need tailoring to all levels of resources in order to achieve more equitable recovery outcomes and prevent exacerbating cohort inequality trajectories.

SUBMITTER: Zewde N

PROVIDER: S-EPMC9122750 | biostudies-literature |

REPOSITORIES: biostudies-literature

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Project description:BackgroundFew studies have quantitatively estimated the income elasticity of demand of voluntary private health insurance (VPHI) in countries with a universal National Health Service. Most studies to date have uses cross-sectional data.MethodsIn this paper we used a longitudinal database from the Bank of Spain to analyse the financial behaviour of approximately six thousand families per wave. We used three waves (2008, 2011 and 2014). We estimated income and wealth semi-elasticities of VPHI in Spain considering personal and family characteristics (age, sex, level of health, education, composition of the household), i.e. changes in the probability of buying VPHI as result of 1% change in income or wealth. We estimated cross-sectional models for each wave and longitudinal models for families remaining for at least two waves, taking account of possible selection bias due to attrition.ResultsCross-sectional models suggest that the income effect on the probability of buying a VPHI increased from 2008 to 2014. The positive impact was observed for, wealth. In 2008 a 1% increase in income is associated with an increase in the probability of having VPHI of 0.064 [95%-CI: 0.023; 0.104] - on the probability scale (0.1) - whereas in 2014, this effect is of 0.116 [95%-CI, 0.094; 0.139]. In 2011 and 2014 the wealth effect is not significant at 5%. The estimation of the longitudinal model leads to different results where both, income and wealth are associated with non- significant results.ConclusionOur three main conclusions are: 1) Cross-sectional estimates of semi-elasticities of VPHI might be biased upwards; 2) Wealth is alongside income are economic determinants, of the decision to buy VPHI in high-income countries; 3) The effects of income and wealth on the probability of buying VHPI are neither linear nor log-linear. There are no significant differences among 60% of the most disadvantaged families, while the families of the two upper wealth quintiles show clearly differentiated behaviour with a higher probability of insurance.