IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Optimal choice of health and retirement in a life-cycle model

Listed author(s):
  • Kuhn, Michael
  • Wrzaczek, Stefan
  • Prskawetz, Alexia
  • Feichtinger, Gustav

We examine within a life-cycle set-up the simultaneous choice of health care and retirement (together with consumption), when health care contributes to both a reduction in mortality and in morbidity. Health tends to impact on retirement via morbidity, determining the disutility of work, and through longevity, determining the need to accumulate retirement wealth. In contrast, the age of retirement drives health through changes in the value of survival and the value of morbidity reductions. We apply our model to analyse the effects of moral hazard in the annuity market: While moral hazard always induces excessive health investments and an excessive duration of working life it also triggers an excessive level of consumption if the impact of health on the disutility of work is sufficiently large. We examine a transfer scheme and mandatory retirement as policies to curtail moral hazard. Numerical analysis illustrates the working of our model.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.econstor.eu/bitstream/10419/67606/1/732091160.pdf
Download Restriction: no

Paper provided by Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON) in its series ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy with number 01/2012.

as
in new window

Length:
Date of creation: 2012
Handle: RePEc:zbw:tuweco:012012
Contact details of provider: Postal:
Wiedner Hauptstraße 8-10, 1040 Wien

Phone: 0043 1 58801 10531
Fax: 0043 1 58801 105399
Web page: http://www.econ.tuwien.ac.at/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window

  1. Javier Birchenall & Rodrigo Reis Soares, 2007. "Altruism, Fertility, and the Value of Children: Health Policy Evaluation and Intergenerational Welfare," Textos para discussão 537, Department of Economics PUC-Rio (Brazil).
  2. Kerkhofs, Marcel & Lindeboom, Maarten & Theeuwes, Jules, 1998. "Retirement, financial incentives and health," Serie Research Memoranda 0042, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  3. Coe, Norma B. & Lindeboom, Maarten, 2008. "Does Retirement Kill You? Evidence from Early Retirement Windows," IZA Discussion Papers 3817, Institute for the Study of Labor (IZA).
  4. Sebnem Kalemli-Ozcan & David N. Weil, 2004. "Mortality Change, the Uncertainty Effect, and Retirement," Working Papers 2004-04, Department of Economics, University of Houston.
  5. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2002. "Social Security, Retirement Age and Optimal Income Taxation," CESifo Working Paper Series 693, CESifo Group Munich.
  6. Hippolyte D'Albis & Paul Lau Sau-Him & Miguel Sanchez-Romero, 2012. "Mortality transition and differential incentives for early retirement," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00659868, HAL.
  7. Badi Baltagi & Francesco Moscone & Elisa Tosetti, 2012. "Medical technology and the production of health care," Empirical Economics, Springer, vol. 42(2), pages 395-411, April.
  8. Maarten Lindeboom & Marcel Kerkhofs, 2009. "Health and work of the elderly: subjective health measures, reporting errors and endogeneity in the relationship between health and work," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 1024-1046.
  9. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Retirement Age and Health Expenditures," CEPR Discussion Papers 4774, C.E.P.R. Discussion Papers.
  10. Dhaval Dave & Inas Rashad & Jasmina Spasojevic, 2006. "The Effects of Retirement on Physical and Mental Health Outcomes," NBER Working Papers 12123, National Bureau of Economic Research, Inc.
  11. David E. Bloom & David Canning & Michael Moore, 2014. "Optimal Retirement with Increasing Longevity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(3), pages 838-858, 07.
  12. Friedrich Breyer & Mathias Kifmann, 2001. "Incentives to Retire Later: A Solution to the Social Security Crisis?," Discussion Papers of DIW Berlin 266, DIW Berlin, German Institute for Economic Research.
  13. Kuhn, Andreas & Wuellrich, Jean-Philippe & Zweimüller, Josef, 2010. "Fatal Attraction? Access to Early Retirement and Mortality," IZA Discussion Papers 5160, Institute for the Study of Labor (IZA).
  14. Ehrlich, Isaac, 2000. "Uncertain lifetime, life protection, and the value of life saving," Journal of Health Economics, Elsevier, vol. 19(3), pages 341-367, May.
  15. Johansson, Per-Olov, 2002. "On the Definition and Age-Dependency of the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 251-263, November.
  16. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-782, August.
  17. Tomas J. Philipson & William H. Dow & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December.
  18. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
  19. David E. Bloom & David Canning & Rick Mansfield & Michael Moore, 2006. "Demographic Change, Social Security Systems, and Savings," NBER Working Papers 12621, National Bureau of Economic Research, Inc.
  20. Johansson, Per-Olov, 2002. "On the Definition and Age-Dependency of the Value of a Statistical Life. A Review and Extension," SSE/EFI Working Paper Series in Economics and Finance 490, Stockholm School of Economics, revised 29 Jan 2002.
  21. Tomiyama, Ken, 1985. "Two-stage optimal control problems and optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 9(3), pages 317-337, November.
  22. Michael Kuhn & Stefan Wrzaczek & Alexia Prskawetz & Gustav Feichtinger, 2010. "Externalities in a Life-Cycle Model with Endogenous Survival," Working Papers 1001, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  23. Lichtenberg, Frank R., 2004. "Sources of U.S. longevity increase, 1960-2001," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 369-389, July.
  24. BOUCEKKINE, RAOUF & SAGLAM , Cagri & VALLÉE, Thomas, 2003. "Technology adoption under embodiment: a two-stage optimal control approach," CORE Discussion Papers 2003055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  25. Ben J. Heijdra & Ward E. Romp, 2007. "Retirement, Pensions, and Ageing," CESifo Working Paper Series 1974, CESifo Group Munich.
  26. Donald S. Shepard & Richard J. Zeckhauser, 1984. "Survival versus Consumption," Management Science, INFORMS, vol. 30(4), pages 423-439, April.
  27. Titus Galama & Arie Kapteyn & Raquel Fonseca & Pierre-Carl Michaud, 2008. "Grossman's Health Threshold and Retirement," Working Papers 658, RAND Corporation.
  28. Liran Einav & Amy Finkelstein & Paul Schrimpf, 2010. "Optimal Mandates and the Welfare Cost of Asymmetric Information: Evidence From the U.K. Annuity Market," Econometrica, Econometric Society, vol. 78(3), pages 1031-1092, 05.
  29. John Bound & Michael Schoenbaum & Todd R. Stinebrickner & Timothy Waidmann, 1998. "The Dynamic Effects of Health on the Labor Force Transitions of Older Workers," NBER Working Papers 6777, National Bureau of Economic Research, Inc.
  30. Norma B. Coe & Gema Zamarro, 2008. "Retirement Effects on Health in Europe," Working Papers 588, RAND Corporation.
  31. Debra Sabatini Dwyer & Olivia S. Mitchell, 1998. "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," NBER Working Papers 6503, National Bureau of Economic Research, Inc.
  32. Disney, Richard & Emmerson, Carl & Wakefield, Matthew, 2006. "Ill health and retirement in Britain: A panel data-based analysis," Journal of Health Economics, Elsevier, vol. 25(4), pages 621-649, July.
  33. 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, 06.
  34. Marcel Kerkhofs & Maarten Lindeboom, 1997. "Age related health dynamics and changes in labour market status," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 407-423.
  35. Jones, Andrew M. & Rice, Nigel & Roberts, Jennifer, 2010. "Sick of work or too sick to work? Evidence on self-reported health shocks and early retirement from the BHPS," Economic Modelling, Elsevier, vol. 27(4), pages 866-880, July.
  36. Pierre-Yves Crémieux & Pierre Ouellette & Caroline Pilon, 1999. "Health care spending as determinants of health outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 627-639.
  37. Leung, S.F., 1992. "Uncertain Lifetime, the Theory of the Consumer, and the Life Cycle Hypothesis," RCER Working Papers 323, University of Rochester - Center for Economic Research (RCER).
  38. Sherwin Rosen, "undated". "The Value of Changes in Life Expectancy," University of Chicago - Population Research Center 87-14, Chicago - Population Research Center.
  39. Tomas Philipson & Gary S. Becker & Dana Goldman & Kevin Murphy, 2010. "Terminal Care and the Value of Life Near Its End," Working Papers 2010-005, Becker Friedman Institute for Research In Economics.
  40. Eric French, 2000. "The effects of health, wealth, and wages on labor supply and retirement behavior," Working Paper Series WP-00-2, Federal Reserve Bank of Chicago.
  41. Amy Finkelstein & James Poterba, 2000. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," NBER Working Papers 8045, National Bureau of Economic Research, Inc.
  42. Lindeboom, Maarten & Llena-Nozal, Ana & van der Klaauw, Bas, 2006. "Disability and Work: The Role of Health Shocks and Childhood Circumstances," CEPR Discussion Papers 5685, C.E.P.R. Discussion Papers.
  43. Kuhn, Michael & Wrzaczek, Stefan & Oeppen, Jim, 2010. "Recognizing progeny in the value of life," Economics Letters, Elsevier, vol. 107(1), pages 17-21, April.
  44. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
  45. repec:gdm:wpaper:2607 is not listed on IDEAS
  46. Borsch-Supan, Axel, 2000. "Incentive effects of social security on labor force participation: evidence in Germany and across Europe," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 25-49, October.
  47. Titus Galama & Arie Kapteyn & Raquel Fonseca & Pierre‐Carl Michaud, 2013. "A Health Production Model With Endogenous Retirement," Health Economics, John Wiley & Sons, Ltd., vol. 22(8), pages 883-902, 08.
  48. Robert Fenge & Pierre Pestieau, 2005. "Social Security and Early Retirement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062496, September.
  49. Kathleen McGarry, 2002. "Health and Retirement: Do Changes in Health Affect Retirement Expectations?," NBER Working Papers 9317, National Bureau of Economic Research, Inc.
  50. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June.
  51. Wolfe, John R, 1985. "A Model of Declining Health and Retirement," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1258-1267, December.
  52. Hamid Faruqee, 2002. "Population Aging and its Macroeconomic Implications; A Framework for Analysis," IMF Working Papers 02/16, .
  53. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, September.
  54. Davies, James B. & Kuhn, Peter, 1992. "Social security, longevity, and moral hazard," Journal of Public Economics, Elsevier, vol. 49(1), pages 91-106, October.
  55. Leung, Siu Fai, 2007. "The existence, uniqueness, and optimality of the terminal wealth depletion time in life-cycle models of saving under uncertain lifetime and borrowing constraint," Journal of Economic Theory, Elsevier, vol. 134(1), pages 470-493, May.
  56. Stefanie Behncke, 2012. "Does retirement trigger ill health?," Health Economics, John Wiley & Sons, Ltd., vol. 21(3), pages 282-300, 03.
  57. 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.
  58. Cawley, John & Ruhm, Christopher J., 2011. "The Economics of Risky Health Behaviors," IZA Discussion Papers 5728, Institute for the Study of Labor (IZA).
  59. David E. Bloom & David Canning & Michael Moore, 2007. "A Theory of Retirement," NBER Working Papers 13630, National Bureau of Economic Research, Inc.
  60. John Bound & Timothy Waidmann, 2007. "Estimating the Health Effects of Retirements," Working Papers wp168, University of Michigan, Michigan Retirement Research Center.
  61. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 39-72.
  62. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June.
  63. Peter Zweifel & Lukas Steinmann & Patrick Eugster, 2005. "The Sisyphus Syndrome in Health Revisited," International Journal of Health Economics and Management, Springer, vol. 5(2), pages 127-145, June.
  64. Disney, Richard, 2000. "Crises in Public Pension Programmes in OECD: What Are the Reform Options?," Economic Journal, Royal Economic Society, vol. 110(461), pages 1-23, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:tuweco:012012. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.