Going from Bad to Worse: Adaptation to Poor Health, Health Spending, Longevity, and the Value of Life
Center for European Governance and Economic Development Research, Discussion Papers, No. 268, November 2015
24 Pages Posted: 28 Nov 2015
Date Written: November 2015
Abstract
Aging humans adapt to their worsening state of health and old people are usually happier than estimated by young individuals. In this paper we investigate how adaptation to a deteriorating state of health affects health spending, life expectancy, and the value of life. We set up a a life cycle model in which individuals are subject to physiological aging, calibrate it with data from gerontology, and compare behavior and outcomes of adapting and non-adapting individuals. While adaptation generally increases the value of life (by about 2 to 5 percent), its impact on health behavior and longevity depends crucially on whether individuals are aware of their adaptive behavior.
Keywords: Health, Adaption, Aging, Longevity, Health Care Demand
JEL Classification: D91, J17, J26, I12
Suggested Citation: Suggested Citation