Life-Cycle Consumption Patterns at Older Ages in the United States and the United Kingdom: Can Medical Expenditures Explain the Difference?

Abstract

This paper documents significantly steeper declines in nondurable expenditures at older ages in the United Kingdom compared to the United States, in spite of income paths being similar. Several possible causes are explored, including different employment paths, housing ownership and expenses, levels and paths of health status, number of household members, and out-of-pocket medical expenditures. Among all the potential explanations considered, those relating to levels and age paths in medical expenses and medical expenditure risk— can fully account for the steeper declines in nondurable consumption in the United Kingdom compared to the United States. (JEL D14, D15, I11, J14)