NBER Publications by Pierre-Carl Michaud

While financial knowledge is strongly positively related to household wealth, there is also considerable cross-sectional variation in both financial knowledge and net asset levels. To explore these patterns, we develop a calibrated stochastic life cycle model featuring endogenous financial knowledge accumulation. The model generates substantial wealth inequality, over and above that of standard life cycle models; this is because higher earners typically have more hump-shaped labor income profiles and lower retirement benefits which, when interacted with precautionary saving motives, boost their need for private wealth accumulation and thus financial knowledge. Our simulations show that endogenous financial knowledge accumulation has the potential to account for a large proportion of wealth...

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy - with a concomitant decrease in the public-sector’s annuity burden - but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or ap...

In 1975, 50 year-old Americans could expect to live slightly longer than their European counterparts. By 2005, American life expectancy at that age has diverged substantially compared to Europe. We find that this growing longevity gap is primarily the symptom of real declines in the health of near-elderly Americans, relative to their European peers. In particular, we use a microsimulation approach to project what US longevity would look like, if US health trends approximated those in Europe. We find that differences in health can explain most of the growing gap in remaining life expectancy. In addition, we quantify the public finance consequences of this deterioration in health. The model predicts that gradually moving American cohorts to the health status enjoyed by Europeans could save u...