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Health Investment over the Life-Cycle

Author

Listed:
  • Timothy Halliday

    () (University of Hawaii at Manoa, Economics Department)

  • Hui He

    () (University of Hawaii at Manoa, Economics Department)

  • Hao Zhang

    () (University of Hawaii at Manoa, Economics Department)

Abstract

We study quantitatively what drives the rise in medical expenditures over the life-cycle. Two motives are considered. First, health delivers a flow of utility each period. Second, better health enables people to allocate more time to productive or pleasurable activities. We calibrate a model of endogenous health accumulation to match key economic targets and gauge its performance by comparing consumption, labor supply, and medical expenditure profiles from the model to their counterparts in the data. The precipitous rise in medical expenditures that occurs late in life is primarily driven by the value of health as a consumption good, not an investment good. This conclusion is robust to different specifications of health investment motives and preferences.

Suggested Citation

  • Timothy Halliday & Hui He & Hao Zhang, 2010. "Health Investment over the Life-Cycle," Working Papers 201020, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201020
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_10-24R.pdf
    File Function: First revsion, 2010
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bonham, Carl & Gangnes, Byron & Zhou, Ting, 2009. "Modeling tourism: A fully identified VECM approach," International Journal of Forecasting, Elsevier, vol. 25(3), pages 531-549, July.
    2. Konan, Denise Eby & Maskus, Keith E., 2006. "Quantifying the impact of services liberalization in a developing country," Journal of Development Economics, Elsevier, pages 142-162.
    3. Denise Eby Konan & Keith Maskus, 1997. "Joint Trade Liberalization and Tax Reform in a Small Open Economy: The Case of Egypt," Working Papers 199703-R, University of Hawaii at Manoa, Department of Economics.
    4. Konan, Denise Eby & Maskus, Keith E., 2000. "Joint trade liberalization and tax reform in a small open economy: the case of Egypt," Journal of Development Economics, Elsevier, vol. 61(2), pages 365-392, April.
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    More about this item

    Keywords

    Health Investment; Consumption motive; investment motive; life-cycle;

    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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