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Growth and Welfare under Endogenous Lifetimes

Maik T. Schneider and Ralph Winkler ()

Scandinavian Journal of Economics, 2021, vol. 123, issue 4, 1339-1384

Abstract: We study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with annuitized wealth. We characterize endogenous healthcare spending in the decentralized market equilibrium and its effects on economic growth, and we identify the moral‐hazard effect in healthcare investments when annuity rates are conditioned on average mortality. In a numerical simulation of our model with OECD data from 2005, we find that the moral‐hazard effect can be substantial and implies sizable welfare losses of approximately 1.4–2.8 percent, depending on the share of annuitized retirement wealth.

Date: 2021
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https://doi.org/10.1111/sjoe.12455

Related works:
Working Paper: Growth and Welfare under Endogenous Lifetime (2017) Downloads
Working Paper: Growth and Welfare under Endogenous Lifetime (2013) Downloads
Working Paper: Growth and Welfare under Endogenous Lifetime (2010) Downloads
Working Paper: Growth and Welfare under Endogenous Lifetime (2010) Downloads
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