The Effects of the Financial Crisis on the Well-Being of Older Americans: Evidence from the Cognitive Economics Study

Abstract

This paper uses the Cognitive Economics Study (CogEcon) to assess the effect of the financial crisis on the well-being of older Americans. Financial wealth fell by about 15 percent for the median household. These financial losses were concentrated among households with high levels of wealth and high cognitive capacities, who tend to have higher exposure to the stock market. Nonetheless, households with little financial wealth suffered declines in well-being—measured by declines in consumption—as large on average as households with substantial exposure to the stock market. Tight credit market conditions and adverse labor market outcomes account for much of the effect of the financial crisis on the consumption of these low-wealth households.