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Optimal health investment and preference structure
- Source :
- Economic Theory, Economic Theory, Springer Verlag, 2015, 60 (3), pp.521-565. ⟨10.1007/s00199-015-0896-5⟩, Economic Theory, 2015, Economic Theory, 2015, 60 (3), pp.521-565. ⟨10.1007/s00199-015-0896-5⟩, Economic Theory, 60(3), 521-565. Springer Verlag
- Publication Year :
- 2015
- Publisher :
- HAL CCSD, 2015.
-
Abstract
- This paper develops a general equilibrium framework to study the role of preference structure (additive, multiplicative and a convex combination of the two) in connecting consumption, health investment, stock of health and capital, and their effects on the wage rate and on productivity. We show that the elasticities of health production, health investment and health cost determine jointly how health influences the wage rate. We examine the steady state and the equilibrium dynamics of the model. In the case of additive preferences, the existence of equilibrium and the stability of the dynamic system require that the ratio of the elasticities of the cost of health and health investment is greater than the elasticity of the production function of health. Health stock can have either positive or negative effects on wages via a mechanism of reservation wages. When preferences are multiplicative, the condition of the existence of equilibrium and the stability of the dynamic system reverse, and the effect of health stock on wages is always positive. Longevity is a decreasing convex-concave function of the elasticity of inter-temporal substitution of health. We also compare the relative behavior of opportunity costs of health under preference structure.
- Subjects :
- RESERVATION WAGES
Economics and Econometrics
Opportunity cost
General equilibrium theory
Consumption
media_common.quotation_subject
DEMAND
Longevity
Wage
Production function
JEL: C - Mathematical and Quantitative Methods/C.C6 - Mathematical Methods • Programming Models • Mathematical and Simulation Modeling/C.C6.C62 - Existence and Stability Conditions of Equilibrium
Microeconomics
JEL: C - Mathematical and Quantitative Methods/C.C6 - Mathematical Methods • Programming Models • Mathematical and Simulation Modeling/C.C6.C61 - Optimization Techniques • Programming Models • Dynamic Analysis
Economics
Convex combination
INFECTIOUS-DISEASES
Stock (geology)
health care economics and organizations
media_common
Health investment
Opportunity costs
ECONOMIC-GROWTH
JEL: E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy/E.E2.E21 - Consumption • Saving • Wealth
Multiplicative function
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
JEL: I - Health, Education, and Welfare/I.I1 - Health/I.I1.I15 - Health and Economic Development
AIDS
LIFE
MODEL
8. Economic growth
Consumption · Health investment · Wage · Longevity · Opportunity costs
Public finance
Subjects
Details
- Language :
- English
- ISSN :
- 09382259 and 14320479
- Database :
- OpenAIRE
- Journal :
- Economic Theory, Economic Theory, Springer Verlag, 2015, 60 (3), pp.521-565. ⟨10.1007/s00199-015-0896-5⟩, Economic Theory, 2015, Economic Theory, 2015, 60 (3), pp.521-565. ⟨10.1007/s00199-015-0896-5⟩, Economic Theory, 60(3), 521-565. Springer Verlag
- Accession number :
- edsair.doi.dedup.....4a21a2cbe1cc606cdc0a8a4c8e4074ca