Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy

Paolo Melindi-Ghidi (1) , Willem Sas (2)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 KU Leuven - Catholic University of Leuven = Katholieke Universiteit Leuven

Better health not only boosts longevity in itself, it also postpones the initial onset of disability and chronic inrmity to a later age. In this paper we examine the potential eects of such compression of morbidity' on pensions, and introduce a health-dependent dimension to the standard pay-as-you-go (PAYG) pension scheme. Studying the long-term implications of such a system in a simple overlapping generations framework, we nd that an increase in public health investment can augment capital accumulation in the long run. Because of this, the combination of health investment with a partially health-dependent PAYG scheme may in fact outperform a purely PAYG system in terms of lifetime welfare.

Mots clés: health investment; disability pension; long-term care; PAYG pension system; OLG model

Domaines: Economies et finances

Paolo Melindi-Ghidi, Willem Sas. Invest as You Go: How Public Health Investment Keeps Pension Systems Healthy. 2015. ⟨halshs-01171701⟩