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Health Investment over the Life-Cycle

Author

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  • Halliday, Timothy J.

    () (University of Hawaii at Manoa)

  • He, Hui

    () (University of Hawaii at Manoa)

  • Zhang, Hao

    () (University of Hawaii at Manoa)

Abstract

We study the evolution of health investment over the life-cycle by calibrating a model of endogenous health accumulation. The model is able to produce the decline in labor supply with age as well as the hump-shaped consumption profile. In both cases, health and health investment play a crucial role as the former encroaches upon healthy time and the latter crowds out non-medical expenditures as people age. Finally, we quantify the value of health as both an investment and a consumption good. We show that the investment motive is about three times higher than the consumption motive during the early 20s, but decreases over the life-cycle until it disappears at retirement. In contrast, the consumption motive increases with age and surpasses the investment motive during the mid 40s.

Suggested Citation

  • Halliday, Timothy J. & He, Hui & Zhang, Hao, 2009. "Health Investment over the Life-Cycle," IZA Discussion Papers 4482, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4482
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    Keywords

    health investment; structural model; medical expenditures;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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