Project Overview:

The project considers the role of socioeconomic status in the determination  of health  and  quality of life in Australia, with a particular emphasis on retirees. It focuses on the impact of fluctuations in wealth over time - particularly that induced by market volatility - as a consequence  of retirement and variations in the value of superannuation on individual life circumstance and particularly on measures of well-being, health status and health care expenditure. This is important for policy makers who aim to develop post-retirement incomes policies that seek to improve elderly Australians’ health outcomes and reduce future health care expenditures. The research involves the econometric analysis of high-quality Australian data to provide evidence on this issue, and will also look to use complementary British data to provide useful comparisons.

Principal Researcher: Professor Anthony Harris (Centre for Health Economics, Monash University)

Research Team: The Monash team, which includes Michael Shields, David Johnson and Sonja Kassenboehmer, has considerable experience in the measurement of the causal links between health and the labour market particularly in the relationship between well-being, health, chronic illness and retirement.


We estimate the effect of stock market fluctuations on subjective well-being and mental health using Australian survey data over the period 2001–2012, which includes the global financial crisis. A particular innovation of the paper is the use of three satisfaction measures – overall, financial, employment – and the use of a stylised lifecycle investment model. These features, coupled with a robust identification strategy based on comparing survey respondents interviewed in the same quarter and location, allow us to better understand individual reactions to stock market changes. We find that stock market increases lead to significant but modest improvements in life satisfaction and mental health. This effect is driven by young and middle-aged males, and is stronger for those with direct exposure to the stock market. For young cohorts, the stock market index acts as a leading indicator of employment prospects, while for older cohorts it acts directly on financial satisfaction.

Summary | Working Paper

This paper analyses the relationship between individuals’ locus of control and their savings behaviour, i.e. wealth accumulation, savings rates and portfolio choices. Locus of   control is a psychological concept that captures individuals’ beliefs about the controllability of life events and is a key component of self-control. We find that households with an internal reference person save more both in terms of levels and as a percentage of their permanent incomes. Although the locus-of-control gap in savings rates is largest among rich households, the gap in wealth accumulation is particularly large for poor households. Finally, households with an internal reference person and average net worth hold significantly less financial wealth, but significantly more pension wealth, than otherwise similar households with an external reference person.

Summary | Working Paper

This study tests whether a household bargaining or household production model better explains decision-making allocations. We use unique longitudinal data that tracks couples for eight years and asks each partner annually about who is responsible for making major financial decisions. An important focus is on the role that non-economic dimensions have  in determining the allocation of financial decision making, in particular, the physical and mental health of each partner, as well as their cognitive ability and personality traits. We  find that household bargaining better captures intra-household financial decision making than household production and specialisation, and that non-economic characteristics of couples are important predictors of who ‘holds the purse strings’. We also find that the within-couple panel data estimates are sensitive to whether we use male or female reports on who is the decision maker.

Summary | Working Paper

This study investigates the pure effect of ageing on total health and aged care expenditure in the next 20 years. Our results indicate that the pure effect has been relatively small and its effect on disposable income and fiscal balance has been mitigated by increased labour force participation among the elderly and increased savings. While this may change in the future, we argue that a focus on greater efficiency in health production and finance is more likely to be effective in delivering high-quality care than trying to restrain the demand for health and aged care among the elderly through finance reform.

Summary | Working Paper

  • The Impact of Changes in Wealth on Health and Well-being in the Retired Elderly (still to come)
  • Education and Financial Decision Making by the Elderly (still to come)
  • Cognitive Decline and Financial Decision Making of the Elderly (still to come)