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 â€œPhilipson-Becker effectâ€ 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|
|Date of revision:|
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CER-ETH Economics working paper series
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