“Dementia and Long-run Trajectories in Household Finances,” Kathleen McGarry, UCLA

POPULATION STUDIES WORKSHOP

Abstract: Existing evidence suggests that wealth may decline before dementia onset, but the mechanisms underlying these reductions are poorly understood. Using longitudinal data from the Health and Retirement Study, we compare household finance trajectories for individuals who later develop dementia and those who do not. We find that wealth divergence between the two groups is not explained by reduced earnings, higher healthcare spending, intentional “spend-down” to qualify for Medicaid coverage, state-dependent utility, or reverse causation by which wealth declines cause dementia. Instead, our results point to impaired financial decision-making beginning about six years prior to clinically recognizable dementia.

Kathleen McGarry is a Professor and Chair in the Department of Economics at UCLA and a Research Associate at the NBER. From 2007-2009 she was the Joel Z. and Susan Hyatt, 1972 Professor of Economics at Dartmouth College and from 2023-2024 she held the Thomas Muench Endowed Chair in   Economics at Stony Brook University and served as Department Chair. McGarry also previously served as a Senior Economist at the Whitehouse Council of Economic Advisers and has had fellowships from the Brookdale Foundation and the NBER.

McGarry’s research focuses on the economics of aging, particularly on the roles of public and private transfers in affecting the well-being of the elderly, and on insurance markets catering to the elderly. Within the context of transfers, McGarry has examined issues such as the effect of Social Security on living arrangements, participation in the SSI program, and the transfer of cash and time assistance between parents and children. Her work on health insurance and long-term care has examined the burden of out-of-pocket expenditures faced by the elderly, particularly near the end of life and the effect of caregiving on labor force participation.

McGarry currently directs the NBER International Long-term Care project and serves as one of the MPIs for the NBER’s Coordinating Center on the Economics of Alzheimer’s Disease / ADRD.  She is a co-investigator for the Health and Retirement Study.

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