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Health Investment over the Life-Cycle

Author

Listed:
  • Timothy Halliday

    (University of Hawaii at Manoa, Economics Department)

  • Hui He

    (University of Hawaii at Manoa, Economics Department)

  • Hao Zhang

    (University of Hawaii at Manoa, Economics Department)

Abstract

We study quantitatively what drives the rise in medical expenditures over the life-cycle. Two motives are considered. First, health delivers a flow of utility each period. Second, better health enables people to allocate more time to productive or pleasurable activities. We calibrate a model of endogenous health accumulation to match key economic targets and gauge its performance by comparing consumption, labor supply, and medical expenditure profiles from the model to their counterparts in the data. The precipitous rise in medical expenditures that occurs late in life is primarily driven by the value of health as a consumption good, not an investment good. This conclusion is robust to different specifications of health investment motives and preferences.

Suggested Citation

  • Timothy Halliday & Hui He & Hao Zhang, 2010. "Health Investment over the Life-Cycle," Working Papers 201020, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201020
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_10-24R.pdf
    File Function: First revsion, 2010
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    References listed on IDEAS

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    Cited by:

    1. Juergen Jung & Chung Tran, 2016. "Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 132-159, April.
    2. Sheng-Ti Hung & Hui He, 2011. "Are Recessions Good for Your Health? A Macroeconomic Analysis," 2011 Meeting Papers 1178, Society for Economic Dynamics.
    3. Juergen Jung & Chung Tran, 2014. "Medical consumption over the life-cycle," Empirical Economics, Springer, vol. 47(3), pages 927-957, November.

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    More about this item

    Keywords

    Health Investment; Consumption motive; investment motive; life-cycle;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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