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M Kuhn, S. Wrzaczek, A. Fürnkranz-Prskawetz, G. Feichtinger:
"Optimal Choice of Health and Retirement in a Life-cycle Model";
Bericht für LEPAS Project - Long-Run Economic Perspectives of an Ageing Society; Berichts-Nr. fp7, 2011; 45 S.

We examine within a life-cycle set-up the simultaneous choice of
health care and retirement (together with consumption), when
health care contributes to both a reduction in mortality and in
morbidity. Health tends to impact on retirement via morbidity,
determining the disutility of work, and through longevity, determining
the need to accumulate retirement wealth. In contrast,
the age of retirement drives health through changes in the value
of survival and the value of morbidity reductions. We apply our model to analyse the effects of moral hazard in the annuity market:
While moral hazard always induces excessive health investments
and an excessive duration of working life it also triggers an
excessive level of consumption if the impact of health on the disutility
of work is sufficiently large. We examine a transfer scheme
and mandatory retirement as policies to curtail moral hazard.
Numerical analysis illustrates.

annuities, demand for health, moral hazard, life-cycle-model,