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Health status and health dynamics in an empirical model of expected longevity

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  • Beni­tez-Silva, Hugo
  • Ni, Huan
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    Abstract

    Expected longevity is an important factor influencing older individuals' decisions such as consumption, savings, purchase of life insurance and annuities, claiming of Social Security benefits, and labor supply. It has also been shown to be a good predictor of actual longevity, which in turn is highly correlated with health status. A relatively new literature on health investments under uncertainty, which builds upon the seminal work by Grossman [Grossman, M., 1972. On the concept of health capital and demand for health. Journal of Political Economy 80, 223-255] has directly linked longevity with characteristics, behaviors, and decisions by utility maximizing agents. Our empirical model can be understood within that theoretical framework as estimating a production function of longevity. Using longitudinal data from the Health and Retirement Study, we directly incorporate health dynamics in explaining the variation in expected longevities, and compare two alternative measures of health dynamics: the self-reported health change, and the computed health change based on self-reports of health status. In 38% of the reports in our sample, computed health changes are inconsistent with the direct report on health changes over time. And another 15% of the sample can suffer from information losses if computed changes are used to assess changes in actual health. These potentially serious problems raise doubts regarding the use and interpretation of the computed health changes and even the lagged measures of self-reported health as controls for health dynamics in a variety of empirical settings. Our empirical results, controlling for both subjective and objective measures of health status and unobserved heterogeneity in reporting, suggest that self-reported health changes are a preferred measure of health dynamics.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 27 (2008)
    Issue (Month): 3 (May)
    Pages: 564-584

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    Handle: RePEc:eee:jhecon:v:27:y:2008:i:3:p:564-584

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    Web page: http://www.elsevier.com/locate/inca/505560

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    References

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    Citations

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    Cited by:
    1. Slade, Alexander N., 2012. "Health investment decisions in response to diabetes information in older Americans," Journal of Health Economics, Elsevier, vol. 31(3), pages 502-520.
    2. Peter Zweifel, 2012. "The Grossman model after 40 years," The European Journal of Health Economics, Springer, vol. 13(6), pages 677-682, December.
    3. Daniel Kemptner, 2013. "Health-Related Life Cycle Risks and Public Insurance," Discussion Papers of DIW Berlin 1320, DIW Berlin, German Institute for Economic Research.
    4. Yin-Chi Wang, 2011. "Health, Education and Development," 2011 Meeting Papers 1263, Society for Economic Dynamics.
    5. Kuo-Liang Chang & George Langelett & Andrew Waugh, 2011. "Health, Health Insurance, and Decision to Exit from Farming," Journal of Family and Economic Issues, Springer, vol. 32(2), pages 356-372, June.
    6. Erdogan Ciftci E & Bago d'Uva T & van Doorslaer E & van Lenthe J, 2009. "Self-perceived health and longevity: do dynamics matter?," Health, Econometrics and Data Group (HEDG) Working Papers 09/31, HEDG, c/o Department of Economics, University of York.
    7. Elena Capatina, 2012. "Life Cycle Effects of Health Risk," Working Papers 201216, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
    8. Haan, Peter & Myck, Michal, 2009. "Dynamics of Poor Health and Non-Employment," IZA Discussion Papers 4154, Institute for the Study of Labor (IZA).
    9. Haan, Peter & Myck, Michal, 2009. "Dynamics of health and labor market risks," Journal of Health Economics, Elsevier, vol. 28(6), pages 1116-1125, December.
    10. Julien Hugonnier & Florian Pelgrin & Pascal St-Amour, 2010. "A structural analysis of the health expenditures and portfolio choices of retired agents," Swiss Finance Institute Research Paper Series 10-29, Swiss Finance Institute.
    11. Gunasekara, Fiona Imlach & Carter, Kristie & Blakely, Tony, 2012. "Comparing self-rated health and self-assessed change in health in a longitudinal survey: Which is more valid?," Social Science & Medicine, Elsevier, vol. 74(7), pages 1117-1124.

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