EconPapers    
Economics at your fingertips  
 

Hyperbolic discounting can be good for your health

Holger Strulik () and Timo Trimborn ()

No 335, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics

Abstract: It has been argued that hyperbolic discounting of future gains and losses leads to time-inconsistent behavior and thereby, in the context of health economics, not enough investment in health and too much indulgence of unhealthy consumption. Here, we challenge this view. We set up a life-cycle model of human aging and longevity in which individuals discount the future hyperbolically and make time-consistent decisions. This allows us to disentangle the role of discounting from the time consistency issue. We show that hyperbolically discounting individuals, under a reasonable normalization, invest more in their health than they would if they had a constant rate of time preference. Using a calibrated life-cycle model of human aging, we predict that the average U.S. American lives about 4 years longer with hyperbolic discounting than he would if he had applied a constant discount rate. The reason is that, under hyperbolic discounting, experiences in old age receive a relatively high weight in life time utility. In an extension we show that the introduction of health-dependent survival probability motivates an increasing discount rate for the elderly and, in the aggregate, a u-shaped pattern of the discount rate with respect to age.

Keywords: discount rates; present bias; health behavior; aging; longevity (search for similar items in EconPapers)
JEL-codes: D03 D11 D91 I10 I12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-cbe, nep-dge, nep-hea and nep-upt
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/173282/1/1011639416.pdf (application/pdf)

Related works:
Journal Article: Hyperbolic discounting can be good for your health (2018) Downloads
Working Paper: Hyperbolic discounting can be good for your health (2016) Downloads
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:zbw:cegedp:335

Access Statistics for this paper

More papers in Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2019-06-13
Handle: RePEc:zbw:cegedp:335