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Optimal Aging and Death

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  • Carl-Johan Dalgaard
  • Holger Strulik

Abstract

This study introduces physiological aging into a simple model of optimal in- tertemporal consumption. In this endeavor we draw on the natural science literature on aging. According to the purposed theory, the speed of the aging process and the time of death are endogenously determined by optimal health investments. At the same time, physiological aspects of the aging process influence optimal savings and health investment. We calibrate the model for the average US male in 2000 and proceed to show that the calibrated model accounts well for the cross-country link between labor productivity and life expectancy in the same year (\the Preston curve"); cross-country income di erences can explain di erences in life expectancy at age 20 of up to a decade. Moreover, techno- logical change in health care of about 1.1% per year can account for the observed shift in the Preston curve between 1980 and 2000.K

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Bibliographic Info

Paper provided by Program on the Global Demography of Aging in its series PGDA Working Papers with number 5810.

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Date of creation: Jul 2010
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Handle: RePEc:gdm:wpaper:5810

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Web page: http://www.hsph.harvard.edu/pgda
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Related research

Keywords: Aging; Longevity; Health Investments; Savings; Preston Curve;

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References

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  1. Eisenring, Christoph, 1999. "Comparative dynamics in a health investment model," Journal of Health Economics, Elsevier, vol. 18(5), pages 653-658, October.
  2. Angus Deaton, 2002. "Health, inequality, and economic development," Working Papers 209, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  3. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
  4. Cervellati, Matteo & Sunde, Uwe, 2005. "Human capital formation, life expectancy, and the process of development," Munich Reprints in Economics 20083, University of Munich, Department of Economics.
  5. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence From Heart Attack Treatments," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 991-1024, November.
  6. Jonathan Skinner & Stephen P. Zeldes, 2002. "The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer," American Economic Review, American Economic Association, vol. 92(2), pages 274-278, May.
  7. Matteo Cervellati & Uwe Sunde, 2005. "Human Capital Formation, Life Expectancy, and the Process of Development," American Economic Review, American Economic Association, vol. 95(5), pages 1653-1672, December.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Optimal aging
    by Economic Logician in Economic Logic on 2011-01-21 16:25:00
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Cited by:
  1. Strulik, Holger, 2011. "Health and Education: Understanding the Gradient," Hannover Economic Papers (HEP) dp-487, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Carl-Johan Dalgaard & Holger Strulik, 2012. "The Genesis of the Golden Age - Accounting for the Rise in Health and Leisure," Discussion Papers 12-10, University of Copenhagen. Department of Economics.
  3. Strulik, Holger, 2011. "Optimal Aging with Uncertain Death," Hannover Economic Papers (HEP) dp-488, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Kevin X. D. Huang & Hui He, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?," Vanderbilt University Department of Economics Working Papers 13-00021, Vanderbilt University Department of Economics.
  5. Hui He & Kevin x.d. Huang, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?--A General Equilibrium Macroeconomic Analysis," Vanderbilt University Department of Economics Working Papers 13-00005, Vanderbilt University Department of Economics.

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  1. Economic Logic blog

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