Optimal health investment and preferences structure
Résumé
This paper develops a general equilibrium framework to study the role of preferences
structure (additive, multiplicative and convex combination of both) 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 wage rate. The reverse holds for multiplicative
preferences and the effect of health stock on wage rate is always positive. L ongevity 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 preferences
structure.
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