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Going from bad to worse: Adaptation to poor health health spending, longevity, and the value of life

Johannes Schünemann (), Holger Strulik () and Timo Trimborn ()

Journal of Economic Behavior & Organization, 2017, vol. 140, issue C, 130-146

Abstract: Unhealthy people adapt to their poor state of health and are usually happier than expected by healthy people. In this paper, we investigate how adapting to a deteriorating state of health affects health spending, life expectancy, and the value of life. We set up a life-cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and compare behavior and outcomes of adapting and non-adapting individuals. While adaptation generally increases lifetime utility (by about 2 percent), its impact on health behavior and longevity depends crucially on whether individuals are aware of their adaptive behavior, i.e. whether they adapt in a naive or sophisticated way. We also compute the QALY change implied by health shocks and discuss whether and how adaptation influences results and the desirability of positive health innovations.

Keywords: Health; Adaption; Aging; Longevity; Health care demand; Value of life; QALYs (search for similar items in EconPapers)
JEL-codes: D11 D91 I12 J17 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Going from Bad to Worse: Adaptation to Poor Health, Health Spending, Longevity, and the Value of Life (2016) Downloads
Working Paper: Going from bad to worse: Adaptation to poor health, health spending, longevity, and the value of life (2015) Downloads
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