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Going from Bad to Worse: Adaptation to Poor Health, Health Spending, Longevity, and the Value of Life

Johannes Schünemann (), Holger Strulik () and Timo Trimborn ()

Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: Unhealthy persons adapt to their bad state of health and persons in bad health are usually happier than estimated by healthy persons. In this paper we investigate how adaptation to a deteriorating state of health affects health spending, life expectancy, and the value of life. We set up a life cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and compare behavior and outcomes of adapting and non-adapting individuals. While adaptation generally increases the life-time utility (by about 2 percent), its impact on health behavior and longevity depends crucially on whether individuals are aware of their adaptive behavior, i.e. whether they adapt in a naive or sophisticated way. We also compute the QALY change implied by health shocks and discuss whether and how adaptation influences results and the desireability of positive health innovations.

JEL-codes: I12 D91 J17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age and nep-hea
Date: 2016
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https://www.econstor.eu/bitstream/10419/145571/1/VfS_2016_pid_6426.pdf (application/pdf)

Related works:
Journal Article: Going from bad to worse: Adaptation to poor health health spending, longevity, and the value of life (2017) Downloads
Working Paper: Going from bad to worse: Adaptation to poor health, health spending, longevity, and the value of life (2015) Downloads
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