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Health status and health dynamics in an empirical model of expected longevity

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  • Beni­tez-Silva, Hugo
  • Ni, Huan

Abstract

Expected longevity is an important factor influencing older individuals' decisions such as consumption, savings, purchase of life insurance and annuities, claiming of Social Security benefits, and labor supply. It has also been shown to be a good predictor of actual longevity, which in turn is highly correlated with health status. A relatively new literature on health investments under uncertainty, which builds upon the seminal work by Grossman [Grossman, M., 1972. On the concept of health capital and demand for health. Journal of Political Economy 80, 223-255] has directly linked longevity with characteristics, behaviors, and decisions by utility maximizing agents. Our empirical model can be understood within that theoretical framework as estimating a production function of longevity. Using longitudinal data from the Health and Retirement Study, we directly incorporate health dynamics in explaining the variation in expected longevities, and compare two alternative measures of health dynamics: the self-reported health change, and the computed health change based on self-reports of health status. In 38% of the reports in our sample, computed health changes are inconsistent with the direct report on health changes over time. And another 15% of the sample can suffer from information losses if computed changes are used to assess changes in actual health. These potentially serious problems raise doubts regarding the use and interpretation of the computed health changes and even the lagged measures of self-reported health as controls for health dynamics in a variety of empirical settings. Our empirical results, controlling for both subjective and objective measures of health status and unobserved heterogeneity in reporting, suggest that self-reported health changes are a preferred measure of health dynamics.

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  • Beni­tez-Silva, Hugo & Ni, Huan, 2008. "Health status and health dynamics in an empirical model of expected longevity," Journal of Health Economics, Elsevier, vol. 27(3), pages 564-584, May.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:3:p:564-584
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    Cited by:

    1. Erdogan Ciftci E & Bago d'Uva T & van Doorslaer E & van Lenthe J, 2009. "Self-perceived health and longevity: do dynamics matter?," Health, Econometrics and Data Group (HEDG) Working Papers 09/31, HEDG, c/o Department of Economics, University of York.
    2. Daniel Kemptner, 2013. "Health-Related Life Cycle Risks and Public Insurance," SOEPpapers on Multidisciplinary Panel Data Research 583, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Erdogan-Ciftci, Esen & van Doorslaer, Eddy & Bago d'Uva, Teresa & van Lenthe, Frank, 2010. "Do self-perceived health changes predict longevity?," Social Science & Medicine, Elsevier, vol. 71(11), pages 1981-1988, December.
    4. Teresa Bago d'Uva & Esen Erdogan Ciftci & Owen O'Donnell & Eddy van Doorslaer, 2015. "Who can predict their Own Demise? Accuracy of Longevity Expectations by Education and Cognition," Tinbergen Institute Discussion Papers 15-052/V, Tinbergen Institute.
    5. Peter Zweifel, 2012. "The Grossman model after 40 years," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(6), pages 677-682, December.
    6. Fossen, Frank M. & König, Johannes, 2015. "Public health insurance and entry into self-employment," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112934, Verein für Socialpolitik / German Economic Association.
    7. Peter Haan & Michal Myck, 2009. "Dynamics of Poor Health and Non-employment," SOEPpapers on Multidisciplinary Panel Data Research 195, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. repec:asb:wpaper:201216 is not listed on IDEAS
    9. repec:kap:sbusec:v:49:y:2017:i:3:d:10.1007_s11187-017-9843-0 is not listed on IDEAS
    10. Kuo-Liang Chang & George Langelett & Andrew Waugh, 2011. "Health, Health Insurance, and Decision to Exit from Farming," Journal of Family and Economic Issues, Springer, vol. 32(2), pages 356-372, June.
    11. Beni­tez-Silva, Hugo & Ni, Huan, 2008. "Health status and health dynamics in an empirical model of expected longevity," Journal of Health Economics, Elsevier, vol. 27(3), pages 564-584, May.
    12. Capatina, Elena, 2015. "Life-cycle effects of health risk," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 67-88.
    13. Slade, Alexander N., 2012. "Health investment decisions in response to diabetes information in older Americans," Journal of Health Economics, Elsevier, vol. 31(3), pages 502-520.
    14. Gunasekara, Fiona Imlach & Carter, Kristie & Blakely, Tony, 2012. "Comparing self-rated health and self-assessed change in health in a longitudinal survey: Which is more valid?," Social Science & Medicine, Elsevier, vol. 74(7), pages 1117-1124.
    15. Yin-Chi Wang, 2011. "Health, Education and Development," 2011 Meeting Papers 1263, Society for Economic Dynamics.
    16. Haan, Peter & Myck, Michal, 2009. "Dynamics of health and labor market risks," Journal of Health Economics, Elsevier, vol. 28(6), pages 1116-1125, December.
    17. Huynh, Kim P. & Jung, Juergen, 2015. "Subjective health expectations," Journal of Policy Modeling, Elsevier, vol. 37(4), pages 693-711.
    18. Grevenbrock, Nils & Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2015. "Biased Survival Beliefs, Psychological and Cognitive Explanations, and the Demand for Life Insurances," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113203, Verein für Socialpolitik / German Economic Association.
    19. Julien Hugonnier & Florian Pelgrin, 2013. "Health and (Other) Asset Holdings," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 663-710.
    20. Julien Hugonnier & Florian Pelgrin & Pascal St-Amour, 2009. "Health and (other) Asset Holdings," Swiss Finance Institute Research Paper Series 09-18, Swiss Finance Institute.
    21. Julien Hugonnier & Florian Pelgrin & Pascal St-Amour, 2010. "A structural analysis of the health expenditures and portfolio choices of retired agents," Swiss Finance Institute Research Paper Series 10-29, Swiss Finance Institute.
    22. Hugonnier, J. & Pelgrin, F. & St-Amour, P., 2016. "Closing Down the Shop: Optimal Health and Wealth Dynamics near the End of Life," Health, Econometrics and Data Group (HEDG) Working Papers 16/28, HEDG, c/o Department of Economics, University of York.

    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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