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The Role Of Consumption And The Financing Of Health Investment Under Epidemic Shocks

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Executive Summary

The authors study the behavior of consumption and health investment resulting from shocks undermining health capital accumulation. They examine the effects on subsequent life cycle of long-lived shocks undermining health with either an acceleration of health capital deterioration, or a decrease in health investment efficiency. They also address the issue of the financing of health investment. They provide new evidence based on nonparametric estimations which show complex non-linear interplay between life expectancy and health expenditure. They then develop a benchmark model where consumption and health capital enter additively in the utility function, featuring independence between the returns from ordinary consumption and health.

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