We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Saving and perceived health risks.
- Authors
Macé, Serge
- Abstract
When utility is health state dependent, saving decisions depend on how perceived future health will affect the marginal utility of consumption. In consequence, people's failure to anticipate hedonic adaptation to adverse health changes leads them to save more if consumption and health are Edgeworth complements, but to save less if they are Edgeworth substitutes. When we add a zero-mean risk on future health, a new effect occurs. Since underestimating hedonic adaptation to health change also increases the individual's sensitivity to health risk, cross-prudence, which corresponds to the willingness to accumulate wealth in the face of future health risks may, depending on the case in question, amplify but also limit the change in savings. These effects add another source of variability among observed saving behaviors. They also singularly complicate the estimation of the health state dependence of the utility function.
- Subjects
SAVINGS; HEALTH risk assessment; MEDICAL economics; MARGINAL utility; CONSUMPTION (Economics); HEDONIC treadmill theory; UTILITY functions
- Publication
Review of Economics of the Household, 2015, Vol 13, Issue 1, p37
- ISSN
1569-5239
- Publication type
Article
- DOI
10.1007/s11150-012-9160-y