Health Economics

Over the last decades an increasing share of the GDP has been expended for the health sector in the industrialized world. We derive optimal life-cycle allocations of consumption and health care, when individual health expenditures curbs own mortality. By using conventional as well as age-structured optimal control techniques we compare the individual to social optimum, when individual health care has a spillover effect on other persons survival. In this context we further address the important issue of optimal retirement age in multi-stage optimal control models. Up to our knowledge there exist no models investigating health expenditures and retirement at the same time, although empirical findings propose a close relation especially when morbidity is considered additionally.