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On The Rise Of Health Spending And Longevity, Raquel Fonseca, Pierre-Carl Michaud, Titus Galama, Arie Kapteyn
On The Rise Of Health Spending And Longevity, Raquel Fonseca, Pierre-Carl Michaud, Titus Galama, Arie Kapteyn
Titus Galama
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 …
Grossman’S Missing Health Threshold, Titus Galama, Arie Kapteyn
Grossman’S Missing Health Threshold, Titus Galama, Arie Kapteyn
Titus Galama
We present a generalized solution to Grossman’s model of health capital (1972), relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an “optimal” level without adjustment costs. The Grossman model then predicts the existence of a health threshold above which individuals do not demand medical care. Our generalized solution addresses a significant criticism: the model’s prediction that health and medical care are positively related is consistently rejected by the data. We suggest structural and reduced form equations to test our generalized solution and contrast the predictions of the model with the empirical literature.
Grossman's Health Threshold And Retirement, Titus Galama, Arie Kapteyn, Raquel Fonseca, Pierre-Carl Michaud
Grossman's Health Threshold And Retirement, Titus Galama, Arie Kapteyn, Raquel Fonseca, Pierre-Carl Michaud
Titus Galama
We formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health provided by Grossman. We explicitly assume a functional form of the utility function and carefully account for initial conditions, which allow us to derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. We 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 we find that advances in population health (health capital) can explain the paradox that …