Life-Cycle Consumption Patterns at Older Ages in the US and the UK: Can Medical Expenditures Explain the Difference?

Abstract

Our data indicate significantly steeper declines in nondurable expenditures in the UK compared to the US in spite of income paths at older ages exhibiting similar declines. We examine several possible causes, including different employment paths, housing ownership and expenses, levels and paths of health status, and out-of -pocket medical expenditures. Among all the factors we considered, we find that differences in levels, age paths, and uncertainty in medical expenses is the most likely reason for the steeper declines in nondurable expenses in the US compared to the UK.