Associate Professor John Bailey Jones (pictured above) of the Department of Economics was recently awarded a $62,000 grant to support and extend this work on elderly savings behavior from the National Institute on Aging.

In his most recent work, “Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles,” (co-authored with Cristina De Nardi and Eric French) he studies how medical expenses affect the saving and work decisions of older individuals. The paper explores the question of elderly individuals spending down their wealth slowly, even as they near the end of their lives. An important reason is medical expenses, which rise rapidly as people age. The authors combine computer simulations (on a cluster supercomputer at the Federal Reserve Bank of Chicago) and detailed data work to show that these concerns can explain much of the elderly’s saving behavior.

In another paper titled “The Effects of Health Insurance and Self-Insurance on Retirement Behavior,” co-authored with Eric French, Professor Jones consider if individuals postpone retirement in order to remain covered by their employers’ health insurance plans. Even after accounting for individual differences in tastes, and allowing individuals to “self-insure” by accumulating wealth, they find that access to health insurance has important effects on retirement. This work has received financial support through grants funded by the Social Security Administration and administered by Boston College and the University of Michigan.

John Jones' principal research interest is macroeconomics, the study of how firms, households and the government interact in the overall economy. Most of his work has focused on improving the “microfoundations”—detailed models of household and firm behavior—used in macroeconomic models.

April 9, 2008