Effects of Health Care Policy Uncertainty on Households' Portfolio Choice

This paper conducts an empirical analysis of the effect of health care policy uncertainty (HCPU) on households’ portfolio choice. A causal identification approach is developed, whose key assumption is the existence of an exogenous variable that shifts responsiveness to HCPU without shifting responsiveness to other macroeconomic time series. Combined with the assumption of risk averse agents, this approach results in an informative bound on the average causal effect of HCPU. The empirical results highlight the importance of HCPU as a determinant of households’ financial behavior, and showcase substantial heterogeneity in HCPU effects across varying unexpected changes to health