Advanced Search
MyIDEAS: Login to save this article or follow this journal

Externalities in a life cycle model with endogenous survival

Contents:

Author Info

  • Kuhn, Michael
  • Wrzaczek, Stefan
  • Prskawetz, Alexia
  • Feichtinger, Gustav

Abstract

We study socially vs individually optimal life cycle allocations of consumption and health, when individual health care curbs own mortality but also has a spillover effect on other persons’ survival. Such spillovers arise, for instance, when health care activity at aggregate level triggers improvements in treatment through learning-by-doing (positive externality) or a deterioration in the quality of care through congestion (negative externality). We combine an age-structured optimal control model at population level with a conventional life cycle model to derive the social and private value of life. We then examine how individual incentives deviate from social incentives and how they can be aligned by way of a transfer scheme. The age-patterns of socially and individually optimal health expenditures and the transfer rate are derived. Numerical analysis illustrates the working of our model.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0304406811000747
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

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

Volume (Year): 47 (2011)
Issue (Month): 4-5 ()
Pages: 627-641

as in new window
Handle: RePEc:eee:mateco:v:47:y:2011:i:4:p:627-641

Contact details of provider:
Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Demand for health; Externality; Life cycle-model; Optimal control; Tax–subsidy; Value of life;

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Sherwin Rosen, . "The Value of Changes in Life Expectancy," University of Chicago - Population Research Center, Chicago - Population Research Center 87-14, Chicago - Population Research Center.
  2. David Cutler & Grant Miller, 2005. "The role of public health improvements in health advances: The twentieth-century United States," Demography, Springer, Springer, vol. 42(1), pages 1-22, February.
  3. Kevin M. Murphy & Robert H. Topel, 2007. "Social Value and the Speed of Innovation," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 433-437, May.
  4. Prskawetz, Alexia & Veliov, Vladimir M., 2007. "Age-specific dynamic labor demand and human capital investment," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(12), pages 3741-3777, December.
  5. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, Elsevier, vol. 49(1), pages 91-106, October.
  6. Philipson, Tomas, 2000. "Economic epidemiology and infectious diseases," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 33, pages 1761-1799 Elsevier.
  7. Cagri Saglam & Vladimir M. Veliov, 2008. "Role of Endogenous Vintage Specific Depreciation in the Optimal Behavior of Firms," International Journal of Economic Theory, The International Society for Economic Theory, The International Society for Economic Theory, vol. 4(3), pages 381-410.
  8. Birchenall, Javier A. & Soares, Rodrigo R., 2007. "Altruism, Fertility, and the Value of Children: Health Policy Evaluation and Intergenerational Welfare," IZA Discussion Papers 2783, Institute for the Study of Labor (IZA).
  9. Bolin, Kristian & Jacobson, Lena & Lindgren, Bjorn, 2002. "Employer investments in employee health: Implications for the family as health producer," Journal of Health Economics, Elsevier, Elsevier, vol. 21(4), pages 563-583, July.
  10. Laxminarayan, Ramanan & Brown, Gardner, 2000. "Economics of Antibiotic Resistance: A Theory of Optimal Use," Discussion Papers, Resources For the Future dp-00-36, Resources For the Future.
  11. Tomas Philipson & Stephane Mechoulan, 2003. "Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets," NBER Working Papers 9598, National Bureau of Economic Research, Inc.
  12. Robert E Hall & Charles I Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(1), pages 39-72, 02.
  13. Kuhn, Michael & Wrzaczek, Stefan & Oeppen, Jim, 2010. "Recognizing progeny in the value of life," Economics Letters, Elsevier, Elsevier, vol. 107(1), pages 17-21, April.
  14. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(3), pages 551-573, June.
  15. Watson, Tara, 2006. "Public health investments and the infant mortality gap: Evidence from federal sanitation interventions on U.S. Indian reservations," Journal of Public Economics, Elsevier, Elsevier, vol. 90(8-9), pages 1537-1560, September.
  16. Tomas Philipson & Gary S. Becker & Dana Goldman & Kevin Murphy, 2010. "Terminal Care and the Value of Life Near Its End," Working Papers, Becker Friedman Institute for Research In Economics 2010-005, Becker Friedman Institute for Research In Economics.
  17. Johansson, Per-Olov, 2002. " On the Definition and Age-Dependency of the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, Springer, vol. 25(3), pages 251-63, November.
  18. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 761-82, August.
  19. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(5), pages 871-904, October.
  20. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  21. Basu, Anirban & Meltzer, David, 2005. "Implications of spillover effects within the family for medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, Elsevier, vol. 24(4), pages 751-773, July.
  22. Jan Clement & Vivian Valdmanis & Gloria Bazzoli & Mei Zhao & Askar Chukmaitov, 2008. "Is more better? An analysis of hospital outcomes and efficiency with a DEA model of output congestion," Health Care Management Science, Springer, Springer, vol. 11(1), pages 67-77, March.
  23. Kort, P. & Hartl, R.F. & Veliov, V.M. & Feichtinger, G., 2005. "Capital accumulation under technological progress and learning: a vintage capital approach," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-154966, Tilburg University.
  24. Forster, Martin, 2001. "The meaning of death: some simulations of a model of healthy and unhealthy consumption," Journal of Health Economics, Elsevier, Elsevier, vol. 20(4), pages 613-638, July.
  25. Ehrlich, Isaac, 2000. "Uncertain lifetime, life protection, and the value of life saving," Journal of Health Economics, Elsevier, Elsevier, vol. 19(3), pages 341-367, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Thomas Fent & Belinda Aparicio Diaz & Alexia Prskawetz, 2013. "Family policies in the context of low fertility and social structure," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 29(37), pages 963-998, November.
  2. Kuhn, Michael & Wrzaczek, Stefan & Prskawetz, Alexia & Feichtinger, Gustav, 2012. "Optimal choice of health and retirement in a life-cycle model," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECO 01/2012, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  3. Bilal Barakat & Johannes Holler & Klaus Prettner & Julia Schuster, 2010. "The Impact of the Economic Crisis on Labour and Education in Europe," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 1006, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  4. Strulik, Holger & Prettner, Klaus & Prskawetz, Alexia, 2011. "R&D-based growth in the post-modern era," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECO 04/2011, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  5. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2010. "Agglomeration processes in ageing societies," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 1005, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  6. Klaus Prettner & Alexia Prskawetz, 2010. "Demographic Change in Models of Endogenous Economic Growth. A Survey," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 1008, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:47:y:2011:i:4:p:627-641. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.