A Closed-Form Solution for the Health Capital Model

21 Pages Posted: 18 Nov 2014

See all articles by Holger Strulik

Holger Strulik

University of Goettingen (Göttingen) - School of Law, Economics, Social Sciences

Date Written: November 18, 2014

Abstract

This paper provides a closed-form solution for the health capital model of health demand. The results are exploited in order to prove analytically the comparative dynamics of the model. Results are derived for the so called pure investment model, the pure consumption model and a combination of both types of models. Given the plausible assumptions that (i) health declines with age and that (ii) the health capital stock at death is lower than the health capital stock needed for eternal life, it is shown that the optimal solution always implies eternal life. This outcome occurs independently from the initial stock of health, the impact of health on productivity, and the importance of health for utility and it is robust against the introduction of a finite age-dependent rate of health depreciation.

Keywords: Longevity, Health, Health Care Demand

JEL Classification: D91, J17, J26, I12

Suggested Citation

Strulik, Holger, A Closed-Form Solution for the Health Capital Model (November 18, 2014). Available at SSRN: https://ssrn.com/abstract=2526698 or http://dx.doi.org/10.2139/ssrn.2526698

Holger Strulik (Contact Author)

University of Goettingen (Göttingen) - School of Law, Economics, Social Sciences ( email )

Germany

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