Closing down the shop: Optimal health and wealth dynamics near the end of life

Julien Hugonnier, Florian Pelgrin and Pascal St‐Amour

Health Economics, 2020, vol. 29, issue 2, 138-153

Abstract: Near the end of life, health declines, mortality risk increases, and curative care is replaced by uninsured long‐term care, accelerating the fall in wealth. Whereas standard explanations emphasize inevitable aging processes, we propose a complementary closing down the shop justification where agents' decisions affect their health and the timing of death. Despite preferring to live, individuals optimally deplete their health and wealth towards levels associated with high death risk and gradual indifference between life and death. Reinstating exogenous aging processes reinforces the relevance of closing down. Using Health and Retirement Study–Consumption and Activities Mail Survey data for elders, a structural estimation of the closed‐form decisions identifies, tests, and confirms the relevance of closing down.

Date: 2020
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Citations: View citations in EconPapers (6)

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https://doi.org/10.1002/hec.3960

Related works:
Working Paper: Closing Down the Shop: Optimal Health and Wealth Dynamics Near the End of Life (2018)
Working Paper: Closing Down the Shop: Optimal Health and Wealth Dynamics near the End of Life (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:29:y:2020:i:2:p:138-153

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