Intertemporal choice with health-dependent discounting

Holger Strulik

Mathematical Social Sciences, 2021, vol. 111, issue C, 19-25

Abstract: In this paper I discuss a standard model of life cycle consumption behavior when the discount rate depends on the state of health and health deteriorates with increasing age. I show that this feature allows the introduction of time-consistent discounting at a non-constant rate and to model, in a convenient way, the notion that individuals discount future payoffs at higher rates when the risk of death increases. I show that the model generates an empirically plausible age-consumption pattern even when perfect annuity markets exist.

Keywords: Discount rates; Aging; Risk of death; Consumption behavior (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:111:y:2021:i:c:p:19-25

DOI: 10.1016/j.mathsocsci.2021.03.001

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