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A dynamic-efficiency rationale for public investment in the health of the young

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  • Torben M. Andersen
  • Joydeep Bhattacharya

Abstract

In this paper we assume away standard distributional and staticefficiency 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 mortality even when private and public investments are perfect substitutes. If health investment reduces mortality risk but individuals do not internalize its effect on the lifeannuity interest rate, the PhilipsonBecker effect emerges; when the young are net borrowers, this works together with dynamic efficiency to support a role for public health.

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  • Torben M. Andersen & Joydeep Bhattacharya, 2014. "A dynamic-efficiency rationale for public investment in the health of the young," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 697-719, August.
    • Handle: RePEc:cje:issued:v:47:y:2014:i:3:p:697-719
    DOI: 10.1111/caje.12095
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    Cited by:

    1. Luca Marchiori & Olivier Pierrard, 2023. "Health subsidies, prevention and welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(6), pages 1304-1336, December.
    2. Torben Andersen & Mikkel Hermansen, 2014. "Durable consumption, saving and retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 825-840, July.
    3. Gylfi Zoega & Marias H. Gestsson, 2018. "Longevity and Companionship in an Overlapping-Generations Model," Birkbeck Working Papers in Economics and Finance 1811, Birkbeck, Department of Economics, Mathematics & Statistics.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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