This renewal will continue the analysis of the determinants of individual households' savings, but it will focus on how individual behavior will respond to potential changes in public policy. In particular, the projects' findings will be used to analyze the effect of potential changes in Social Security, Medicare, and disability insurance. A major aim of the program project is hence to use the analysis of the individual households' behavior to project the consequences of changes in public policy impinging on health and retirement. The program project has two cores and three projects. The Administrative Core (continuing Core A) will provide overall administrative support for the entire project. It will also provide support for research coordination and dissemination. The Database Core (continuing Core B) will continue to work on methods for improving the wealth data in the HRS and on issues of survey design (bracketing, question order, anchoring) that impinge on the preference and expectational measures as well as the wealth measures. The three projects include: (1) preference parameter project (continuing Project) will develop new measures quantifying the altruism and labor supply of individuals and extend the analysis of the existing parameters relating to risk tolerance. These estimates will be used to study bequests, portfolio choices, and the interaction between the retirement and wealth accumulation decision. (2) The earnings dynamics project (new Project 7) will use HRS Social Security earnings history to estimate the stochastic process followed by labor income. Such estimates are of interest in themselves, particularly in what they reveal about the persistence of shocks to earnings. The earnings process project will also make them the subject of analysis. It will treat the stochastic process for earnings a consequence of choices made by individuals instead of something exogenous. It will also examine how individuals adjust their consumption, saving, and labor supply follow shocks to earnings. And (3) the earnings expectations project (new Project 8) will collect and analyze probabilistic expectations data related to economic insecurity and lifetime earnings expectations and will integrate these measures with explicit questions bout the behavioral response to changes in Social Security and Medicare benefits.
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