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


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Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Closing Down the Shop: Optimal Health and Wealth Dynamics Near the End of Life
Hugonnier J., Pelgrin F., St-Amour P.
Institution details
HEC Lausanne
Issued date
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.

End of life, Life cycle, Dis-savings, Endogenous mortality risk, Unmet medical needs, Right to refuse treatment
Create date
19/10/2017 10:37
Last modification date
21/08/2019 5:17
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