A Dynamic Efficiency Rationale for Public Investment in the Health of the Young
AbstractIn this paper, we assume away standard distributional and static-efficiency arguments for public health, and instead, seek a dynamic efficiency rationale. We study a lifecycle model wherein young agents make health investments to reduce mortality risk. We identify a welfare rationale for public health under dynamic efficiency and exogenous mortalityeven when private and public investments are perfect substitutes. If health investment reduces mortality risk but individuals do not internalize its effect on the life-annuity interest rate, the Philipson-Becker effect emerges; when the young are net borrowers, it works together with dynamic efficiency to support a role for public health.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 35503.
Date of creation: 24 Sep 2012
Date of revision:
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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public health; moral hazard; overlapping generations; mortality risk;
Other versions of this item:
- Andersen, Torben M & Bhattacharya, Joydeep, 2013. "A Dynamic Efficiency Rationale for Public Investment in the Health of the Young," Staff General Research Papers 35872, Iowa State University, Department of Economics.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-06 (All new papers)
- NEP-HEA-2012-10-06 (Health Economics)
- NEP-MAC-2012-10-06 (Macroeconomics)
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.:
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CER-ETH Economics working paper series
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