M107, Hong-Jing Hall, NCU
(中央大學鴻經館 M107)
Healthcare and Consumption with Aging
Sinan Aksoy (University of California, San Diego)
Abstract:
Healthcare benefit s individuals by slowing the natural growth of mortality, indirectly increasing utility through consumption over a longer lifetime. This paper solves the problem of household dynamic healthcare, consumption, and saving when natural mortality grows exponentially to reflect the Gompertz law, while both utility and healthcare are isoelastic. The optimization problem reduces to a nonlinear ordinary diff erential equation with a unique solution, which is constructed using Perron’s method for viscosity solutions. Optimal consumption and health-care spending policies depend on mortality and imply an endogenous curve similar to the Gompertz law. Absolute health expenditure increases with age; relative to consumption, it increase for the typical adult life and slowly declines in the old age.