Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy

Paolo Melindi-Ghidi and Willem Sas ()
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Willem Sas: Center for Economic Studies (CES), KU Leuven, https://feb.kuleuven.be/Willem.Sas

No 1525, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Better health not only boosts longevity in itself, it also postpones the initial onset of disability and chronic infirmity to a later age. In this paper we examine the potential effects of such 'compression of morbidity' on pensions, and introduce a health-dependent dimension to the standard pay-as-you-go (PAYG) pension scheme. Studying the long-term implications of such a system in a simple overlapping generations framework, we find that an increase in public health investment can augment capital accumulation in the long run. Because of this, the combination of health investment with a partially health-dependent PAYG scheme may in fact outperform a purely PAYG system in terms of lifetime welfare.

Keywords: health investment; disability pension; long-term care; PAYG pension system; OLG model (search for similar items in EconPapers)
JEL-codes: I15 J26 O41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2015-07-04
New Economics Papers: this item is included in nep-age, nep-dge and nep-hea
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Invest as you go: how public health investment keeps pension systems healthy (2015)
Working Paper: Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1525

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