The Influence of Public Policy on Health, Wealth and Mortality
John Karl Scholz
University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)
University of Wisconsin - Madison - Department of Economics
September 1, 2011
Michigan Retirement Research Center Research Paper No. 2011-252
In this project we extend an augmented lifecycle model, incorporating a Grossman-style model of health capital, to enhance understanding of factors influencing consumption, wealth and health. We develop three primary results when using the model to explore the effects of stylized versions of Medicare and Social Security on wealth and longevity. First, our model calibration implies consumption and health are complements. As health depreciates with age, households will get less utility from consumption than would be in the case of a lifecycle model that does not endogenize health. Second, it appears that forward-looking households, when confronted by a substantially reduced safety net, will respond by reducing consumption and by reducing their health investment and therefore longevity. Third, there is a potentially important difference between short- and long-run responses to policy.
Number of Pages in PDF File: 43
Keywords: consumption, wealth, health, Medicare, Social Security, longevityworking papers series
Date posted: November 19, 2011
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