A Theory of Education and Health

79 Pages Posted: 18 Mar 2015

See all articles by Titus J. Galama

Titus J. Galama

USC Center for Economic and Social Research

Hans van Kippersluis

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 3 versions of this paper

Date Written: March 5, 2015

Abstract

This paper presents a unified theory of human capital with both health capital and, what we term, skill capital endogenously determined within the model. By considering joint investment in health capital and in skill capital, the model highlights similarities and differences in these two important components of human capital. Health is distinct from skill: health is important to longevity, provides direct utility, provides time that can be devoted to work or other uses, is valued later in life, and eventually declines, no matter how much one invests in it (a dismal fact of life). Lifetime earnings are strongly multiplicative in skill and health, so that investment in skill capital raises the return to investment in health capital, and vice versa. The theory provides a conceptual framework for empirical and theoretical studies aimed at understanding the complex relationship between education and health, and generates several new testable predictions.

Keywords: health investment, lifecycle model; human capital, health capital, optimal control

JEL Classification: D91, I10, I12, J00, J24

Suggested Citation

Galama, Titus J. and van Kippersluis, Hans, A Theory of Education and Health (March 5, 2015). CESR-Schaeffer Working Paper No. 2015-001, Available at SSRN: https://ssrn.com/abstract=2577613 or http://dx.doi.org/10.2139/ssrn.2577613

Titus J. Galama (Contact Author)

USC Center for Economic and Social Research ( email )

Playa Vista, CA
United States
+310 430 6358 (Phone)

Hans Van Kippersluis

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands

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