Optimal Choice of Health and Retirement in a Life-Cycle Model

Michael Kuhn, Stefan Wrzaczek, Alexia Fürnkranz-Prskawetz and Gustav Feichtinger

VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis from Verein für Socialpolitik / German Economic Association

Abstract: We examine within a life-cycle set-up the choice of health and retirement. Health care contributes to a reduction in both mortality, determining the need to accumulate retirement wealth, and in morbidity, determining the disutility of work. The retirement age affects health through the value of survival and the value of morbidity reductions. We compare the allocation for a first-best setting where the individual can transfer wealth freely within a perfect annuity market with a second-best set-up with an incentive incompatible (yet actuarially fair) retirement scheme and an imperfect annuity market and show how the inefficiencies shape the health-retirement nexus.

Keywords: annuities; demand for health; moral hazard; life-cycle-model; optimal control; retirement; value of life (search for similar items in EconPapers)
JEL-codes: D91 I12 J26 (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: Optimal choice of health and retirement in a life-cycle model (2015)
Working Paper: Optimal choice of health and retirement in a life-cycle model (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc11:48681

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