A Dynamic Efficiency Rationale for Public Investment in the Health of the Young
In this paper, we assume away standard distributional and static-efficiency 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 mortalityeven when private and public investments are perfect substitutes. If health investment reduces mortality risk but individuals do not internalize its effect on the life-annuity interest rate, the "Philipson-Becker effect" emerges; when the young are net borrowers, it works together with dynamic efficiency to support a role for public health.
|Date of creation:||05 Feb 2013|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
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CER-ETH Economics working paper series
10/137, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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- Maik T. Schneider & Ralph Winkler, 2017. "Growth and Welfare under Endogenous Lifetime," CESifo Working Paper Series 6367, CESifo Group Munich.
- Maik T. Schneider & Ralph Winkler, 2010. "Growth and Welfare under Endogenous Lifetime," Diskussionsschriften dp1013, Universitaet Bern, Departement Volkswirtschaft.
- Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June.
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