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A closed-form solution for the health capital model

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  • Strulik, Holger

Abstract

This paper provides a closed-form solution for the health capital model of health demand. The results are exploited in order to prove analytically the comparative dynamics of the model. Results are derived for the so called pure investment model, the pure consumption model and a combination of both types of models. Given the plausible assumptions that (i) health declines with age and that (ii) the health capital stock at death is lower than the health capital stock needed for eternal life, it is shown that the optimal solution always implies eternal life. This outcome occurs independently from the initial stock of health, the impact of health on productivity, and the importance of health for utility and it is robust against the introduction of a finite age-dependent rate of health depreciation.

Suggested Citation

  • Strulik, Holger, 2014. "A closed-form solution for the health capital model," Center for European, Governance and Economic Development Research Discussion Papers 222, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:222
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    References listed on IDEAS

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    1. Cropper, M L, 1977. "Health, Investment in Health, and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1273-1294, December.
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    5. Havranek, Tomas & Horvath, Roman & Irsova, Zuzana & Rusnak, Marek, 2015. "Cross-country heterogeneity in intertemporal substitution," Journal of International Economics, Elsevier, vol. 96(1), pages 100-118.
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    7. Carl-Johan Dalgaard & Holger Strulik, 2014. "Optimal Aging And Death: Understanding The Preston Curve," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 672-701, June.
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    16. Carl-Johan Dalgaard & Holger Strulik, 2017. "The Genesis of the Golden Age: Accounting for the Rise in Health and Leisure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 132-151, March.
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    Cited by:

    1. D. Dragone & H. Strulik, 2017. "Human Health and Aging over an Infinite Time Horizon," Working Papers wp1104, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Carl-Johan Dalgaard & Holger Strulik, 2017. "The Genesis of the Golden Age: Accounting for the Rise in Health and Leisure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 132-151, March.
    3. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2017. "Going from bad to worse: Adaptation to poor health health spending, longevity, and the value of life," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 130-146.
    4. Jochen Hartwig & Jan-Egbert Sturm, 2018. "Testing the Grossman model of medical spending determinants with macroeconomic panel data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(8), pages 1067-1086, November.
    5. repec:eee:joecag:v:6:y:2015:i:c:p:5-12 is not listed on IDEAS
    6. repec:eee:jeborg:v:158:y:2019:i:c:p:269-287 is not listed on IDEAS
    7. Strulik, Holger, 2018. "The return to education in terms of wealth and health," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 1-14.
    8. Strulik, Holger, 2018. "Smoking kills: An economic theory of addiction, health deficit accumulation, and longevity," Journal of Health Economics, Elsevier, vol. 62(C), pages 1-12.
    9. Davide Dragone & Holger Strulik, 2018. "Negligible Senescence: An Economic Life Cycle Model for the Future," CESifo Working Paper Series 7246, CESifo Group Munich.
    10. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2017. "The gender gap in mortality: How much is explained by behavior?," Journal of Health Economics, Elsevier, vol. 54(C), pages 79-90.
    11. Trimborn, Timo & Schünemann, Johannes & Strulik, Holger, 2016. "Disentangling the Gender Gap in Longevity," Annual Conference 2016 (Augsburg): Demographic Change 145570, Verein für Socialpolitik / German Economic Association.
    12. Bolin, Kristian & Caputo, Michael R., 2017. "Consumption and Investment Demand when Health Evolves Stochastically," Working Papers in Economics 710, University of Gothenburg, Department of Economics.
    13. Titus Galama, 2011. "A Contribution to Health Capital Theory," Working Papers WR-831, RAND Corporation.
    14. Strulik, Holger, 2019. "An economic theory of depression and its impact on health behavior and longevity," Journal of Economic Behavior & Organization, Elsevier, vol. 158(C), pages 269-287.

    More about this item

    Keywords

    longevity; health; health care demand;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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