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Long-term health investment when people underestimate their adaptation to old age-related health problems

  • Octave Jokung

    ()

  • Serge Macé

    ()

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    This paper explores in a two-period model the economic implications of people’s tendency to underestimate their ability to adapt to age-related health problems. We model this misperception by assuming that the individual underestimates his future subjective health. Under standard assumptions, we show that, when people allocate their resources during their youth between present consumption, savings, and health investment, they invest more in health as long as the magnitude of the cross-marginal utility of health and consumption is not too negative. Copyright Springer-Verlag Berlin Heidelberg 2013

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    File URL: http://hdl.handle.net/10.1007/s10198-012-0449-9
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    Article provided by Springer in its journal The European Journal of Health Economics.

    Volume (Year): 14 (2013)
    Issue (Month): 6 (December)
    Pages: 1003-1013

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    Handle: RePEc:spr:eujhec:v:14:y:2013:i:6:p:1003-1013
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    1. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2009. "Approaches to Estimating the Health State Dependence of the Utility Function," American Economic Review, American Economic Association, vol. 99(2), pages 116-21, May.
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    9. Sloan, Frank A. & Kip Viscusi, W. & Chesson, Harrell W. & Conover, Christopher J. & Whetten-Goldstein, Kathryn, 1998. "Alternative approaches to valuing intangible health losses: the evidence for multiple sclerosis1," Journal of Health Economics, Elsevier, vol. 17(4), pages 475-497, August.
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    11. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
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    13. Jon Gjerde & Sverre Grepperud & Snorre Kverndokk, 2005. "On adaptation and the demand for health," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1283-1301.
    14. Edwards, Ryan D, 2008. "Health Risk and Portfolio Choice," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 472-485.
    15. Macé, Serge & Le Lec, Fabrice, 2011. "On fatalistic long-term health behavior," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 434-439, June.
    16. Winter, Laraine & Parker, Barbara, 2007. "Current health and preferences for life-prolonging treatments: An application of prospect theory to end-of-life decision making," Social Science & Medicine, Elsevier, vol. 65(8), pages 1695-1707, October.
    17. Carbone, Jared C. & Kverndokk, Snorre & Rogeberg, Ole Jorgen, 2005. "Smoking, health, risk, and perception," Journal of Health Economics, Elsevier, vol. 24(4), pages 631-653, July.
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