Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67606
Authors: 
Kuhn, Michael
Wrzaczek, Stefan
Prskawetz, Alexia
Feichtinger, Gustav
Year of Publication: 
2012
Series/Report no.: 
ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2012
Abstract: 
We examine within a life-cycle set-up the simultaneous choice of health care and retirement (together with consumption), when health care contributes to both a reduction in mortality and in morbidity. Health tends to impact on retirement via morbidity, determining the disutility of work, and through longevity, determining the need to accumulate retirement wealth. In contrast, the age of retirement drives health through changes in the value of survival and the value of morbidity reductions. We apply our model to analyse the effects of moral hazard in the annuity market: While moral hazard always induces excessive health investments and an excessive duration of working life it also triggers an excessive level of consumption if the impact of health on the disutility of work is sufficiently large. We examine a transfer scheme and mandatory retirement as policies to curtail moral hazard. Numerical analysis illustrates the working of our model.
Subjects: 
annuities
demand for health
moral hazard
life-cycle-model
optimal control
retirement
value of life
JEL: 
D91
I12
J26
Document Type: 
Working Paper

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