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A dynamic‐efficiency rationale for public investment in the health of the young

Author

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  • Torben M. Andersen
  • Joydeep Bhattacharya
Abstract
In this paper we assume away standard distributional and static‐efficiency arguments for public health and instead seek a dynamic efficiency rationale. We study a lifecycle model wherein young agents make health investments to reduce mortality risk. We identify a welfare rationale for public health under dynamic efficiency and exogenous mortality even when private and public investments are perfect substitutes. If health investment reduces mortality risk but individuals do not internalize its effect on the life‐annuity interest rate, the “Philipson‐Becker effect” emerges; when the young are net borrowers, this works together with dynamic efficiency to support a role for public health. Raisons fondées sur l'efficience dynamique pour l'investissement public dans la santé des jeunes. Dans ce mémoire, on met de côté les arguments conventionnels de santé publique fondés sur la répartition des revenus et l'efficience statique pour s'intéresser à explorer les raisons d'efficience dynamique pour ce genre d'investissement. On étudie un modèle de cycle de vie où les jeunes agents font des investissements en soins de santé pour réduire le risque de mortalité. On identifie un raisonnement en termes de bien‐être en faveur de dépenses en santé publique quand il y a efficience dynamique et mortalité exogène, même quand les investissements privés et publics sont de parfaits substituts. Si l'investissement en soins de santé réduit le risque de mortalité, mais que les individus n'internalisent pas ses effets sur le taux d'intérêt sur les rentes viagères, l'effet Philipson‐Becker émerge; quand les jeunes sont des emprunteurs nets, cet effet joue dans le même sens que l'efficience dynamique en faveur d' un rôle pour la santé publique.

Suggested Citation

  • Torben M. Andersen & Joydeep Bhattacharya, 2014. "A dynamic‐efficiency rationale for public investment in the health of the young," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(3), pages 697-719, August.
    • Handle: RePEc:wly:canjec:v:47:y:2014:i:3:p:697-719
    DOI: 10.1111/caje.12095
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    Cited by:

    1. Torben Andersen & Mikkel Hermansen, 2014. "Durable consumption, saving and retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 825-840, July.
    2. Gylfi Zoega & Marias H. Gestsson, 2018. "Longevity and Companionship in an Overlapping-Generations Model," Birkbeck Working Papers in Economics and Finance 1811, Birkbeck, Department of Economics, Mathematics & Statistics.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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