UNU-MERIT Working Papers Series
Optimal health investment with separable and non-separable preferences
Théophile T. Azomahou, Bity Diene, Mbaye Diene & Luc Soete #2012-047We use a general equilibrium framework to study optimal health
investment in a dynamic model where agents derive utility from
consumption and health. The steady state and the dynamics of the model
are studied under separable and non-separable preferences. A shock
undermining health which increases health expenditure and weakens the
income base, not only affects savings but also compromises the
consumption capacity. The magnitude of the effects strongly depends on
the preferences. The dynamics of the model includes the equilibrium
dynamics and bifurcations. Simulation experiments lend additional
supports to our findings in favor of the non-separable preferences.
JEL classifcation: C61; C62; I15; E21
Keywords: Consumption; health investment; preferences; dynamics; saving
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