The Influence of Public Policy on Health, Wealth and Mortality

43 Pages Posted: 19 Nov 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: September 1, 2011

Abstract

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.

Keywords: consumption, wealth, health, Medicare, Social Security, longevity

Suggested Citation

Scholz, John Karl and Seshadri, Ananth, The Influence of Public Policy on Health, Wealth and Mortality (September 1, 2011). Michigan Retirement Research Center Research Paper No. 2011-252, Available at SSRN: https://ssrn.com/abstract=1961723 or http://dx.doi.org/10.2139/ssrn.1961723

John Karl Scholz (Contact Author)

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

1180 Observatory Drive
Madison, WI 53706
United States
608-262-5380 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ananth Seshadri

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

1180 Observatory Drive
Madison, WI 53706
United States
608-262-6196 (Phone)
608-263-3876 (Fax)

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