Optimal Health Investment Strategies

Bruce A Forster

Bulletin of Economic Research, 1989, vol. 41, issue 1, 45-57

Abstract: This paper investigates the optimal health investment strategies for two modifications of a model proposed by V. Dardanoni (1986). The first modification retains the assumption of a constant marginal opportunity cost of health investment. In this case, the optimal strategy involves a most rapid approach path with investment taking on extreme values. In the second modification, the assumption of increasing marginal opportunity cost of investment eliminates the most rapid approach path feature and the optimal investment level varies continuously over time. The implications of considering finite lifespans explicitly are analyzed. A "turnpike property" is identified for the second modification. Copyright 1989 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1989
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