Individual Investments in Education and Health
Health Economics Research Network at the University of Oslo: HERO Working Paper 2014: 1
55 Pages Posted: 1 Apr 2014
Date Written: March 31, 2014
Empirical studies show that years of schooling are positively correlated with good health. The implication may go from education to health, from health to education, and from factors that influence both variables. We formalize a model that determines an individual’s demand for knowledge and health based on the causal effects, and study the impacts of policy instruments such as subsidies on medical care, subsidizing schooling, income tax reduction, lump sum transfers and improving health at young age. Our results indicate that income transfers such as distributional policies may be the best instrument to improve welfare, while medical care subsidies is the best instrument for longevity. Subsidies to medical care or education would require large imperfections for health and education to be more welfare improving than distributional policies. Our simulations suggest that underlying factors that impact both health and education may be the main explanation for the correlation shown empirically.
Keywords: Demand for health, Demand for education, Human capital, Numerical modeling, Causality
JEL Classification: C61, D91, I12, I21
Suggested Citation: Suggested Citation