Saving behaviour and health: A high-dimensional Bayesian analysis of British panel data

Abstract

We develop a two-part high-dimensional Bayesian modelling approach to analyse the relationship between saving behaviour and health. In contrast to the existing literature, our approach allows different data-generating processes for the decision to save and the amount saved, and therefore unveils a more detailed picture of the relationship between financial behaviour and health than previous work. We explore different measures of saving, including monthly saving behaviour and the stock of financial assets held. Further, we exploit British panel data, which includes an extensive range of biomarkers. Our second contribution lies in comparing the effects of these objective measures of health with commonly used self-assessed health measures. We find that health is a significant determinant of saving behaviour and financial asset holding, and that biomarker measures have differential impacts on saving behaviour compared to self-reported health measures.