Subsidizing Health-Conscious Behavior Now or Later
We examine subsidies for health care when consumers have present-biased preferences, which lead them to underestimate the effect of today s consumption on future health. We compare immediate subsidies paid for health-conscious consumption and future subsidies rewarding a good health outcome. We show that, while both policies can implement the first best choice, doing so by future subsidies results in higher costs for the government. This arises since the individual anticipates that, from today s perspective, she will make biased use of future subsidies. Hence, in order to create the same incentive effect, a future subsidy must be higher in present value terms.
|Date of creation:||2013|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
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- Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2012.
"Taxing Sin Goods and Subsidizing Health Care,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 114(1), pages 101-123, 03.
- Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2008. "Taxing Sin Goods and Subsidizing Health Care," CESifo Working Paper Series 2297, CESifo Group Munich.
- CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2008. "Taxing sin goods and subsidizing health care," CORE Discussion Papers 2008031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & De Donder, Philippe & Maldonado, Darío & Pestieau, Pierre, 2008. "Taxing Sin Goods and Subsidizing Health Care," CEPR Discussion Papers 6777, C.E.P.R. Discussion Papers.
- Craig A. Gallet & John A. List, 2003. "Cigarette demand: a meta-analysis of elasticities," Health Economics, John Wiley & Sons, Ltd., vol. 12(10), pages 821-835.
- Ted O'Donoghue & Matthew Rabin, 1999. "Incentives for Procrastinators," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 769-816.
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