Uncertain lifetime, health investment and welfare

Pablo Garcia-Sanchez () and Olivier Pierrard
Authors registered in the RePEc Author Service: Pablo Garcia Sanchez

No 178, BCL working papers from Central Bank of Luxembourg

Abstract: We build a life cycle model to study the implications of two types of lifetime uncertainty on investment in health and welfare. We show that when the hazard rate of death depends on age, uncertainty increases health investment. Instead, when hazard rate depends on human frailty, uncertainty decreases health investment. In both cases, uncertainty reduces welfare. The size of the effects depends on an aggregate parameter related to the natural increase in human frailty with age, to the marginal return on health investment and to the rate of time preference. We first derive the main results from a small model which admits an analytical solution, before generalizing them in a larger model using numerical simulations.

Keywords: life cycle; uncertainty; health; welfare. (search for similar items in EconPapers)
JEL-codes: C60 D15 D81 I12 I18 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023-11
New Economics Papers: this item is included in nep-dge, nep-hea and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Working Paper: Uncertain Lifetime, Health Investment And Welfare (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp178

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