Health Investment over the Life-Cycle

Timothy Halliday (), Hui He () and Hao Zhang ()
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Timothy Halliday: University of Hawaii at Manoa
Hao Zhang: University of Hawaii at Manoa

No 4482, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We study the evolution of health investment over the life-cycle by calibrating a model of endogenous health accumulation. The model is able to produce the decline in labor supply with age as well as the hump-shaped consumption profile. In both cases, health and health investment play a crucial role as the former encroaches upon healthy time and the latter crowds out non-medical expenditures as people age. Finally, we quantify the value of health as both an investment and a consumption good. We show that the investment motive is about three times higher than the consumption motive during the early 20s, but decreases over the life-cycle until it disappears at retirement. In contrast, the consumption motive increases with age and surpasses the investment motive during the mid 40s.

Keywords: health investment; structural model; medical expenditures (search for similar items in EconPapers)
JEL-codes: I12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hea and nep-mic
Date: 2009-10

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Working Paper: Health Investment over the Life-Cycle (2009)
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