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Title: | Conditioning public pensions on health: effects on capital accumulation and welfare | Authors: | Fabbri, Giorgio Leroux, Marie-Louise Melindi-Ghidi, Paolo Sas, Willem |
Issue Date: | 2024 | Publisher: | SPRINGER | Source: | JOURNAL OF POPULATION ECONOMICS, 37 (2) (Art N° 47) | Abstract: | This paper develops an overlapping generations model that links a public health system to a pay-as-you-go (PAYG) pension system. It relies on two assumptions. First, the health system directly finances curative health spending on the elderly. Second, public pensions partially depend on health status by introducing a component indexed to society's average level of old-age disability. Reducing the average disability rate in the economy then lowers pension benefits as the need to finance long-term care services also drops. We study the effects of introducing such a 'comprehensive' Social Security system on individual decisions, capital accumulation, and welfare. We first show that health investments can boost savings and capital accumulation under certain conditions. Second, if individuals are sufficiently concerned with their health when old, it is optimal to introduce a health-dependent pension system, as this will raise social welfare compared to a system where pensions are not tied to the society's average level of old-age disability. Our analysis thus highlights an important policy recommendation: making PAYG pension schemes partially health-dependent can be beneficial to society. | Notes: | Melindi-Ghidi, P (corresponding author), Aix Marseille Univ, CNRS, AMSE, 5 Blvd Maurice Bourdet CS 50498, F-13205 Marseille 1, France. paolo.melindi-ghidi@univ-amu.fr |
Keywords: | Curative health investments;PAYG pension system;Disability;Overlapping generations;Long-term care;H55;I15;O41 | Document URI: | http://hdl.handle.net/1942/42981 | ISSN: | 0933-1433 | e-ISSN: | 1432-1475 | DOI: | 10.1007/s00148-024-01020-z | ISI #: | 001205444700001 | Rights: | The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2024 | Category: | A1 | Type: | Journal Contribution |
Appears in Collections: | Research publications |
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