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Health Investment over the Life-Cycle

Timothy Halliday, Hui He (huihe@hawaii.edu) and Hao Zhang (haozhang@hawaii.edu)
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Hui He: Department of Economics, University of Hawaii at Manoa
Hao Zhang: Department of Economics, University of Hawaii at Manoa

No 201210, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: We quantify what drives the rise in medical expenditures over the life- cycle. Three motives are considered. First, health delivers a flow of utility each period (the consumption motive). Second, better health enables people to allocate more time to productive or pleasurable activities (the investment motive). Third, better health improves survival prospects (the survival mo- tive). We calibrate an overlapping generations model with endogenous health accumulation to match key economic targets and then we gauge its perfor- mance by comparing key age-pro?les from the model to their counterparts in the data. We ?nd that the investment motive is more important than the consumption motive until about age 50. After that, the rise in medical ex- penditures is primarily driven by the value of health as a consumption good. The survival motive is quantitatively less important when compared to the other two motives. Finally, with our calibrated model, we conduct a series of counter-factual experiments to investigate how modi?cations to social security, government-run health insurance, and longevity impact the life-cycle behavior of medical expenditures as well as the aggregate medical expenditures-GDP ratio.

Keywords: Health Investment Motive; Medical Expenditure; life Cycle (search for similar items in EconPapers)
JEL-codes: E21 I12 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2012-06-01
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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http://www.economics.hawaii.edu/research/workingpapers/WP_12-10.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: HEALTH INVESTMENT OVER THE LIFE-CYCLE (2019) Downloads
Working Paper: Health Investment over the Life-Cycle (2010) Downloads
Working Paper: Health Investment over the Life-Cycle (2009) Downloads
Working Paper: Health Investment over the Life-Cycle (2009) Downloads
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