THE GOLDEN RULE OF LONGEVITY

Marias H. Gestsson and Gylfi Zoega

Macroeconomic Dynamics, 2019, vol. 23, issue 1, 384-419

Abstract: How much should society invest in medical care that extends the lives of the older generations? We derive a golden rule for the level of health care expenditures and find that the optimal level of life-extending health care expenditures should increase with rising productivity, increase with the retirement age, and also increase with the population growth rate if a higher growth rate lowers the ratio of retirees to working-age people sufficiently, while the effects of an improvement in medical technology are ambiguous. Moreover, we find that a market economy may be inefficient in terms of the provision of life-extending health care because an individual ignores the effect of his own longevity on the income of others.

Date: 2019
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Working Paper: The Golden Rule of Longevity (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:23:y:2019:i:01:p:384-419_00

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