Publications (13) View all
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Article: A HEALTH PRODUCTION MODEL WITH ENDOGENOUS RETIREMENT.
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ABSTRACT: We formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health and derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. We argue that the literature has been unnecessarily restrictive in assuming that health is always at the 'optimal' health level. Exploring the properties of corner solutions, we find that advances in population health decrease the retirement age, whereas at the same time, individuals retire when their health has deteriorated. This potentially explains why retirees point to deteriorating health as an important reason for early retirement, whereas retirement ages have continued to fall in the developed world, despite continued improvements in population health and mortality. In our model, workers with higher human capital invest more in health and, because they stay healthier, retire later than those with lower human capital whose health deteriorates faster. Copyright © 2012 John Wiley & Sons, Ltd.Health Economics 08/2012; · 2.12 Impact Factor -
Article: On the Rise of Health Spending and Longevity
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ABSTRACT: We use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. We estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a “synergy” or interaction effect which helps explain an additional 37% increase in health spending. We estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10%.HEN: Determinants of Morbidity & Mortality (Topic). 03/2010; -
Article: Grossman's Health Threshold and Retirement
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ABSTRACT: The authors formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health provided by Grossman. They explicitly assume a functional form of the utility function and carefully account for initial conditions, which allow them to derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. They argue that the Grossman literature has been unnecessarily restrictive in assuming that health is always at Grossman's "optimal" health level. Exploring the properties of corner solutions they find that advances in population health (health capital) can explain the paradox that while population health and mortality have continued to improve in the developed world, retirement ages have continued to fall with retirees pointing to deteriorating health as an important reason for early retirement. They find that improvements in population health decrease the retirement age, while at the same time individuals retire when their health has deteriorated. In their model, workers with higher human capital (say white collar workers) invest more in health and because they stay healthier retire later than those with lower human capital (say blue collar workers) whose health deteriorates faster. Plausibly, most individuals are endowed with an initial stock of health that is substantially greater than the level required to be economically productive.RAND Labor & Population (Topic). 01/2009; -
Article: Grossman's Health Threshold and Retirement
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ABSTRACT: The authors formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health provided by Grossman. They explicitly assume a functional form of the utility function and carefully account for initial conditions, which allow them to derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. They argue that the Grossman literature has been unnecessarily restrictive in assuming that health is always at Grossman's "optimal" health level. Exploring the properties of corner solutions they find that advances in population health (health capital) can explain the paradox that while population health and mortality have continued to improve in the developed world, retirement ages have continued to fall with retirees pointing to deteriorating health as an important reason for early retirement. They find that improvements in population health decrease the retirement age, while at the same time individuals retire when their health has deteriorated. In their model, workers with higher human capital (say white collar workers) invest more in health and because they stay healthier retire later than those with lower human capital (say blue collar workers) whose health deteriorates faster. Plausibly, most individuals are endowed with an initial stock of health that is substantially greater than the level required to be economically productive.01/2009; -
Article: On The Rise of Health Spending and Longevity
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ABSTRACT: We find disease incidence and prevalence are both higher among Americans in age groups 55-64 and 70-80 indicating that Americans suffer from higher past cumulative disease risk and experience higher immediate risk of new disease onset compared to the English. In contrast, age specific mortality rates are similar in the two countries with an even higher risk among the English after age 65. Our second aim explains large financial gradients in mortality in the two countries. Among 55-64 year olds, we estimate similar health gradients in income and wealth in both countries, but for 70-80 year old, we find no income gradient in UK. Standard behavioral risk factors (work, marriage, obesity, exercise, and smoking) almost fully explain income gradients among 55-64 years old in both countries and a significant part among Americans 70-80 years old. The most likely explanation of no English income gradient relates to their income benefit system. Below the median, retirement benefits are largely flat and independent of past income and hence past health during the working years. Finally, we report evidence using a long panel of American respondents that their subsequent mortality is not related to large changes in wealth experienced during the prior ten year period.Institute for the Study of Labor (IZA), IZA Discussion Papers. 01/2009;
