Beyond Income: Health, Wealth, and Racial Welfare Gaps Among Older Americans

We estimate racial and ethnic disparities in well-being among older Americans using longitudinal data and an expected utility framework that incorporates differences in consumption, leisure, health, mortality, and wealth. Our analysis broadly indicates that racial and ethnic inequality is greater than suggested by other welfare metrics such as consumption or life expectancy alone. Decomposition exercises show that a majority of the estimated welfare gaps are determined by age 60 initial conditions as opposed to racial and ethnic differences in dynamic processes after age 60. Additional counterfactuals suggest that eliminating common heath risk factors such as hypertension or diabetes in late life only marginally closes overall welfare gaps. These simulations suggest that policies aimed at closing racial and ethnic gaps in late life may be more successful and efficient if targeted earlier in the life cycle.