Health and Wealth: A Dynamic Demand for Medical Care

31 Pages Posted: 22 Jun 2007 Last revised: 23 Dec 2008

See all articles by Jennifer Kohn

Jennifer Kohn

affiliation not provided to SSRN

Robert H. Patrick

Rutgers University

Date Written: September 2008

Abstract

We generalize extant health capital models to provide an economic explanation for why individuals invest in health when survival and/or longevity prospects are poor. We allow relative health to impact utility and model depreciation as an amount rather than a rate. As a result, the decline in health causes an inevitable disequilibrium between an increasing marginal benefit from health and a declining cost of health capital that individuals can only resolve with increasing investment in medical care. A central implication is that individuals will demand more medical care the greater their decline in health at any level of health. We develop additional testable hypotheses about what drives medical care spending.

Keywords: demand for medical care, optimal control

JEL Classification: Health

Suggested Citation

Kohn, Jennifer Leigh and Patrick, Robert H., Health and Wealth: A Dynamic Demand for Medical Care (September 2008). iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN: https://ssrn.com/abstract=994723 or http://dx.doi.org/10.2139/ssrn.994723

Jennifer Leigh Kohn (Contact Author)

affiliation not provided to SSRN

Robert H. Patrick

Rutgers University ( email )

Rutgers Business School - Newark and New Brunswick
Department of Finance and Economics
Newark, NJ 07102
United States
(973) 353-5247 (Phone)

HOME PAGE: http://www.rci.rutgers.edu/~rpatrick/hp.html

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