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Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy

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  • Paolo Melindi-Ghidi

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Willem Sas

    (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven)

Abstract

Better health not only boosts longevity in itself, it also postpones the initial onset of disability and chronic inrmity to a later age. In this paper we examine the potential eects of such compression of morbidity' on pensions, and introduce a health-dependent dimension to the standard pay-as-you-go (PAYG) pension scheme. Studying the long-term implications of such a system in a simple overlapping generations framework, we nd that an increase in public health investment can augment capital accumulation in the long run. Because of this, the combination of health investment with a partially health-dependent PAYG scheme may in fact outperform a purely PAYG system in terms of lifetime welfare.

Suggested Citation

  • Paolo Melindi-Ghidi & Willem Sas, 2015. "Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy," Working Papers halshs-01171701, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01171701
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01171701
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    Cited by:

    1. Luca Marchiori & Olivier Pierrard, 2020. "Health subsidies, prevention and welfare," BCL working papers 139, Central Bank of Luxembourg.

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    More about this item

    Keywords

    health investment; disability pension; long-term care; PAYG pension system; OLG model;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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