Professor Jones has been engaged in a number of projects examining how individuals and households behave during the later years of life. One of the papers from this project, “On the Distribution and Dynamics of Health Care Costs,” was published in the Journal of Applied Econometrics (2004). In it, Professor Jones and co-author Dr. Eric French (of the Federal Reserve Bank of Chicago) develop a tractable model of the stochastic process for health-care costs, allowing them to measure not only the risk of catastrophic medical expense within single year, but also that of persistent expenses that accumulate into catastrophic lifetime costs. This paper is one of several projects that utilize the Health and Retirement Survey (HRS), a major demographic data set of elderly households. In a second paper, “The Effects of Health Insurance and Self-Insurance on Retirement Behavior” (Center for Retirement Research Paper 2004-12, updated December 2004), Jones and French analyze the effects of Medicare and health-cost uncertainty on retirement and savings. Using an estimable dynamic programming model, they find that shifting the Medicare eligibility age to 67 will delay retirement, but that shifting the Social-Security normal retirement age to 67 will cause an even larger delay. This paper has been presented extensively and is almost ready for submission at a leading journal. In a third paper, “Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles,” Jones and French, along with Dr. Mariacristina De Nardi (of the Federal Reserve Bank of Chicago and the National Bureau of Economic Research) examine the saving decisions of the very old. They find medical expenses that rise quickly with both age and permanent income can explain why elderly singles, and especially the richest ones, run down their assets so slowly. They also find that social insurance, embodied in such programs as Medicaid and SSI, has a big impact on the elderly savings. This paper is currently under review at the Journal of Econometrics. Professor Jones has also published research in other areas: “Financial Liberalization and Banking Crises in Emerging Economies” (with Betty C. Daniel) is forthcoming in the Journal of International Economics; and “Optimal Investment with Lumpy Costs” (with Duc T. Le) appeared in the Journal of Economic Dynamics and Control (2005).
Professor Jones received a grant from the Michigan Retirement Research Center (MRRC) for the period October 2006 through September 2007. This project funded by this grant, “The Effects of Health Insurance and Self-Insurance on Retirement Behavior,” is assessing the role of Medicare and employer-provided health insurance in determining retirement. Jones is estimating and analyzing a dynamic programming model of saving and retirement that accounts for uncertain medical expenses, Social Security, and social insurance.
Jones’s projects on the retirement and savings decisions of the elderly will continue to occupy much of his time in the near future. He will be revising and resubmitting a grant proposal entitled, “Saving Motives after Retirement,” which he has previously submitted to NIH. This proposed project, which received a priority score just below the funding level, will attempt to construct a richer model of elderly saving behavior using a version of the life-cycle model that reconciles two phenomena (i.e., some households keep large amounts of assets even when very old, and, people with high lifetime income save at a higher rate than others). He will estimate parameters of the model from the Assets and Health Dynamics of the Oldest Old data set (AHEAD) and use the model to evaluate policy reforms such as abolishing estate tax or changing Social Security benefits.
Jones’s research on the elderly contributes to the signature theme on the life course and complements the work of several other researchers in that group. His expertise in econometric methods is a valuable resource to the Statistics and Computing core, as is his experience with the HRS data.
Jones relies on the Administrative Core for essential help with proposal preparation and submission.