Health and Wealth in a Life Cycle Model

34 Pages Posted: 11 Nov 2010 Last revised: 24 May 2011

See all articles by John Karl Scholz

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Ananth Seshadri

University of Wisconsin - Madison - Department of Economics

Date Written: May 20, 2011

Abstract

This paper presents a preliminary model of health investments over the life cycle. Health affects both longevity and provides flow utility. We analyze the interplay between consumption choices and investments in health by solving each household’s dynamic optimization problem to obtain predictions on health investments and consumption choices over the lifecycle. Our preliminary model does a good job of matching the distribution of medical expenses across households in the sample. We illustrate the scope of future model applications by examining the effects of a stylized Medicare program on patterns of wealth and mortality.

Suggested Citation

Scholz, John Karl and Seshadri, Ananth, Health and Wealth in a Life Cycle Model (May 20, 2011). Michigan Retirement Research Center Research Paper No. 2010-224, Available at SSRN: https://ssrn.com/abstract=1706918 or http://dx.doi.org/10.2139/ssrn.1706918

John Karl Scholz (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Ananth Seshadri

University of Wisconsin - Madison - Department of Economics ( email )

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Madison, WI 53706
United States
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608-263-3876 (Fax)

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