This paper investigates the relationshipbetween saving and health spending in a two-periodoverlapping generations economy. Individuals work in thefirst period of life and live in retirement in old age. Healthspending is an activity that increases quality of life andlongevity. Empirical evidence shows that both healthspending and saving behave as luxury goods but theirbehaviour differs markedly according to the level of percapita GDP. The share of saving on GDP has a concaveshape with respect to per capita GDP, whereas the share ofhealth spending on GDP increases more than proportionallywith respect to per capita GDP. The ratio of saving tospending is nonlinear with respect to income, i.e. firstincreasing and then decreasing. This ratio, in the proposedmodel, is equal to the ratio between the elasticity of theutility function with respect to saving and the elasticity ofthe utility function with respect to health.
|Number of pages||11|
|Journal||THE EUROPEAN JOURNAL OF HEALTH ECONOMICS|
|Publication status||Published - 2010|
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance (miscellaneous)
- Health Policy