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Life Expectancy, Health Spending and Saving

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  • Tamara Fioroni

Abstract

This paper investigates the relationship between saving and health spending in a two-period overlapping generations economy. Individuals work in the first period and live in retirement in the old age. Health investment is an activity that increases the quality of life and the probability of surviving from the first period to the next. Empirical evidence shows that both health spending and saving, i.e. the consumption when old, behave as luxury goods but their behavior is strongly different according to the level of per capita GDP. The share of saving on GDP is nearly concave with respect to per capita GDP whereas the share of health expenditure on GDP increases more than proportionally with respect to per capita GDP. The ratio of saving to health investment is nonlinear with respect to per capita GDP, i.e. first increasing and then decreasing. This ratio, in the proposed model, is equal to the ratio between the elasticity of the survival function and the elasticity of the utility function. The model can replicate empirical results if the utility function and the survival function presents a non-constant elasticity.

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Bibliographic Info

Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2006/62.

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Date of creation: 01 Jan 2006
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Handle: RePEc:pie:dsedps:2006/62

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Keywords: D91; I12; E21;

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Cited by:
  1. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, Springer, vol. 103(1), pages 59-82, May.
  2. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  3. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  4. Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2010. "Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2010/96, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  5. Fanti, Luciano & Gori, Luca, 2010. "Child policy solutions for the unemployment problem," Economics Letters, Elsevier, Elsevier, vol. 109(3), pages 147-149, December.
  6. Luciano Fanti & Luca Gori, 2012. "PAYG Pensions and Economic Cycles Exogenous versus Endogenous Fertility," Public Finance Review, , , vol. 40(2), pages 240-269, March.
  7. Manuela Gussoni - Andrea Mangani, 2009. "The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter?," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/90, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  8. Luciano Fanti & Luca Gori, 2009. "Endogenous lifetime in an overlapping generations small open economy," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/92, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  9. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  10. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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