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Health Investment over the Life-Cycle

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  • 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)

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    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.

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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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    Bibliographic Info

    Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201020.

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    Length: 63 pages
    Date of creation: 30 Nov 2010
    Date of revision:
    Handle: RePEc:hai:wpaper:201020

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    Related research

    Keywords: Health Investment; Consumption motive; investment motive; life-cycle;

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    1. Konan, Denise Eby & Maskus, Keith E., 2003. "Quantifying the impact of services liberalization in a developing country," Policy Research Working Paper Series 3193, The World Bank.
    2. Konan, Denise Eby & Maskus, Keith E., 2000. "Joint trade liberalization and tax reform in a small open economy: the case of Egypt," Journal of Development Economics, Elsevier, vol. 61(2), pages 365-392, April.
    3. Bonham, Carl & Gangnes, Byron & Zhou, Ting, 2009. "Modeling tourism: A fully identified VECM approach," International Journal of Forecasting, Elsevier, vol. 25(3), pages 531-549, July.
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