Externalities in a life cycle model with endogenous survival
研究个人健康支出对自身死亡率及他人生存概率的溢出效应，比较社会最优与个人最优的消费与健康配置，并设计转移方案来矫正激励偏差。
We study socially vs individually optimal life cycle allocations of consumption and health, when individual health care curbs own mortality but also has a spillover effect on other persons' survival. Such spillovers arise, for instance, when health care activity at aggregate level triggers improvements in treatment through learning-by-doing (positive externality) or a deterioration in the quality of care through congestion (negative externality). We combine an age-structured optimal control model at population level with a conventional life cycle model to derive the social and private value of life. We then examine how individual incentives deviate from social incentives and how they can be aligned by way of a transfer scheme. The age-patterns of socially and individually optimal health expenditures and the transfer rate are derived. Numerical analysis illustrates the working of our model.