Life Expectancy, Health Spending and Saving
Tamara Fioroni ()
Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy
This paper investigates the relationship between saving and health spending in a two-period overlapping generations economy. Individuals work in the first period and live in retirement in the old age. Health investment is an activity that increases the quality of life and the probability of surviving from the first period to the next. Empirical evidence shows that both health spending and saving, i.e. the consumption when old, behave as luxury goods but their behavior is strongly different according to the level of per capita GDP. The share of saving on GDP is nearly concave with respect to per capita GDP whereas the share of health expenditure on GDP increases more than proportionally with respect to per capita GDP. The ratio of saving to health investment is nonlinear with respect to per capita GDP, i.e. first increasing and then decreasing. This ratio, in the proposed model, is equal to the ratio between the elasticity of the survival function and the elasticity of the utility function. The model can replicate empirical results if the utility function and the survival function presents a non-constant elasticity.
Keywords: Intertemporal Choice; Health Spending; Adult Mortality; Saving (search for similar items in EconPapers)
JEL-codes: D91 I12 E21 (search for similar items in EconPapers)
Note: ISSN 2039-1854
References: Add references at CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2006/62
Access Statistics for this paper
More papers in Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by ().