Competitive Markets with Endogenous Health Risks

Alberto Bennardo () and Salvatore Piccolo ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study a general equilibrium model where agents’ preferences, productivity and labor endowments depend on their health status, and occupational choices affect individual health distributions. Efficiency typically requires agents of the same type to obtain different expected utilities if assigned to di¤erent occupations. Under mild assumptions, workers with riskier jobs must get higher expected utilities if health a¤ects production capabilities. The same holds if health affects preferences and health enhancing consumption activities are sufficiently effective, so that income and health are substitutes. The converse obtains when health a¤ects preferences, but health enhancing consumption activities are not very effective, and hence income and health are complements. Competitive equilibria are first-best if lottery contracts are enforceable, but typically not if only assets with deterministic payoffs are traded. Compensating wage differentials which equalize the utilities of workers in different jobs are incompatible with ex-ante efficiency. Finally, absent asymmetric information, there exist deterministic cross-jobs transfers leading to ex-ante efficiency.

Keywords: compensating wage differentials; competitive markets; individual health risks; Pareto efficiency (search for similar items in EconPapers)
JEL-codes: D5 D61 D80 I18 (search for similar items in EconPapers)
Date: 2005-10-01, Revised 2008-03-01
New Economics Papers: this item is included in nep-hea and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.csef.it/WP/wp145.pdf (application/pdf)

Related works:
Journal Article: COMPETITIVE MARKETS WITH ENDOGENOUS HEALTH RISKS (2014)
Working Paper: Competitive Markets with Endogenous Health Risks (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:145

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().