M Kuhn, S. Wrzaczek, A. Fürnkranz-Prskawetz, G. Feichtinger:
"Externalities in a life cycle model with endogenous survival";
Journal of Mathematical Economics, 47 (2011), 4 - 5; S. 627 - 641.

Kurzfassung englisch:
We study socially vs individually optimal life cycle allocations of consumption and health, when
individual health care curbs own mortality but also has a spillover effect on other persons´ survival.
Such spillovers arise, for instance, when health care activity at aggregate level triggers improvements
in treatment through learning-by-doing (positive externality) or a deterioration in the quality of care
through congestion (negative externality). We combine an age-structured optimal control model at
population level with a conventional life cycle model to derive the social and private value of life. We
then examine how individual incentives deviate from social incentives and how they can be aligned by
way of a transfer scheme. The age-patterns of socially and individually optimal health expenditures and
the transfer rate are derived. Numerical analysis illustrates the working of our model.

Demand for health, Externality, Life cycle-model, Optimal control, Tax-subsidy, Value of life

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