Closing Down the Shop: Optimal Health and Wealth Dynamics near the End of Life

Julien Hugonnier, F. Pelgrin and Pascal St-Amour

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: The observed health decline near the end of life coincides with less curative (e.g. hospital stay, doctor visits), and more comfort (e.g. nursing home) care, which accelerate both the fall in wealth, and the timing of death. We investigate whether these dynamics jointly result from a closing down the shop decision i.e. a depletion of the health stock is optimally selected (and eventually accelerated), leading to states characterized by indifference between life, and death. Towards that aim, we expand, structurally estimate, and simulate a life cycle model of financial,and health expenses with endogenous mortality exposure (Hugonnier et al., 2013). Under economically plausible, and statistically verified conditions, we find that, unless sufficiently rich and healthy, agents will optimally select expected depletion of their health capital, and associated increase in death likelihood. Moreover, we identify a wealth and health locus below which agents accelerate their health depletion. Importantly, wealth is also expected to decline for all, such that all surviving agents eventually enter the closing down phase.

Keywords: End of life; Life cycle; Dis-savings; Endogenous mortality risk; Unmet medical needs; Right to refuse treatment (search for similar items in EconPapers)
JEL-codes: D14 D91 I12 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-age and nep-hea
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Related works:
Journal Article: Closing down the shop: Optimal health and wealth dynamics near the end of life (2020)
Working Paper: Closing Down the Shop: Optimal Health and Wealth Dynamics Near the End of Life (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:hectdg:16/28

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