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Health Investment over the Life-Cycle

Author

Listed:
  • Hui He

    (University of Hawaii)

  • Hao Zhang

    (University of Hawaii)

  • Tim Halliday

    (University of Hawaii)

Abstract

We study the evolution of health investment over the life-cycle by calibrating a model of endogenous health accumulation. The model is able to produce the decline in labor supply with age as well as the hump-shaped consumption profile. In both cases, health and health investment play a crucial role as the former encroaches upon healthy time and the latter crowds out non-medical expenditures as people age. Finally, we quantify the value of health as both an investment and a consumption good. We show that the investment motive is about three times higher than the consumption motive during the early 20s, but decreases over the life-cycle until it disappears at retirement. In contrast, the consumption motive increases with age and surpasses the investment motive during the mid 40s.

Suggested Citation

  • Hui He & Hao Zhang & Tim Halliday, 2010. "Health Investment over the Life-Cycle," 2010 Meeting Papers 1179, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:1179
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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