COMPETITIVE MARKETS WITH ENDOGENOUS HEALTH RISKS

Alberto Bennardo () and Salvatore Piccolo ()

Journal of the European Economic Association, 2014, vol. 12, issue 3, 755-790

Abstract: We study an economy where agents' productivity and labor endowment depend on their health status, and indivisible occupational choices affect individual health distributions. We show that Pareto efficiency requires cross-transfers across occupations. Moreover, workers with relatively less safe jobs must get positive transfers whenever labor supply is not very reactive to wages, a condition in line with the findings of a large empirical literature. In these instances, compensating wage differentials equalizing the utilities of ex-ante identical workers in different jobs undermine ex-ante efficiency. Moreover, competitive equilibria where only assets with deterministic payoffs are traded are not first-best. Finally, we show that simple transfer schemes, implemented through linear subsidies to health insurance, enhance efficiency.

Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1111/jeea.12078 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Competitive Markets with Endogenous Health Risks (2008)
Working Paper: Competitive Markets with Endogenous Health Risks (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jeurec:v:12:y:2014:i:3:p:755-790

Access Statistics for this article

Journal of the European Economic Association is currently edited by Fabrizio Zilibotti, Dirk Bergemann, Nicola Gennaioli, Claudio Michelacci and Daniele Paserman

More articles in Journal of the European Economic Association from European Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().