Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96981
Authors: 
Kuhn, Michael
Wrzaczek, Stefan
Prskawetz, Alexia
Feichtinger, Gustav
Year of Publication: 
2010
Series/Report no.: 
Vienna Institute of Demography Working Papers 1/2010
Abstract: 
We study socially vs. individually optimal lifecycle allocations of consumption and health care, when individual health expenditure curbs own mortality but also has a spillover effect on other persons' survival. Such spillovers arise, for instance, when health care activity at aggregate level triggers improvements in treatment through learningbydoing (positive externality) or a deterioration in the quality of care through congestion (negative externality). We combine an agestructured optimal control model at population level with a conventional lifecycle model to derive the social and private value of life. We then examine how individual incentives deviate from social incentives and how they can be aligned by way of a transfer scheme. The agepatterns of socially and individually optimal health expenditure and the transfer rate are derived. Numerical analysis illustrates the workings of our model.
Subjects: 
Demand for health
externality
life-cycle-model
optimal control
tax-subsidy
value of life
Document Type: 
Working Paper

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