Abstract
We study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with annuitized wealth. We characterize endogenous healthcare spending in the decentralized market equilibrium and its effects on economic growth, and we identify the moral-hazard effect in healthcare investments when annuity rates are conditioned on average mortality. In a numerical simulation of our model with OECD data from 2005, we find that the moral-hazard effect can be substantial and implies sizable welfare losses of approximately 1.4–2.8 percent, depending on the share of annuitized retirement wealth.
| Original language | English |
|---|---|
| Pages (from-to) | 1339-1384 |
| Number of pages | 46 |
| Journal | The Scandinavian Journal of Economics |
| Volume | 123 |
| Issue number | 4 |
| Early online date | 8 Jul 2021 |
| DOIs | |
| Publication status | Published - 31 Oct 2021 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth
Keywords
- Economic growth
- endogenous longevity
- healthcare expenditures
- healthcare tech-nology
- moral hazard
ASJC Scopus subject areas
- Economics and Econometrics
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