Optimal Aging and Death: Understanding the Preston Curve

Abstract

Abstract. The present study examines whether the Preston curve reflects a causal impact of income on longevity or, for example, factors correlated with both income and life expectancy. In order to understand the Preston curve better, we develop a model of optimal intertemporal consumption in which the representative consumer is subject to physiological aging. In modeling aging we draw on recent research in the fields of biology and medicine. The speed of the aging process, and thus the time of death, are endogenously determined by optimal health investments. We calibrate the model to US data and proceed to show that the model accounts for nearly 80% of the cross-country differences in life expectancy that the Preston curve captures.

The gender gap in mortality: How much is explained by behavior?

“…Setup. We consider the basic health deficit model by Dalgaard and Strulik (2014) augmented with utility derived from a good state of health. This allows us to consider two motives for health investments: the desire for longevity and the experience of high instantaneous utility in a good state of health.…”

“…2 Men and women are subject to biological aging. Following Mitnitski et al (2002a) and Dalgaard and Strulik (2014) we assume that health deficits evolve according tȯ…”

“…Individuals have the possibility to slow down deficit accumulation by deliberate health investments h(t). As explained in detail in Dalgaard and Strulik (2014), µ is considered to be a physiological parameter that captures the inherent force of aging; A (scale) and γ (curvature) represent the parameters of the health technology; and a measures environmental influence beyond individual control. In order to disentangle mechanisms we focus on health care demand as the sole gateway for health behavior.…”

“…We set up a standard economic model of health deficit accumulation (Dalgaard and Strulik, 2014) and calibrate it separately for men and women such that it replicates life expectancy and the life cycle trajectories for health expenditure and health deficit accumulation for average (white) male and female U.S. Americans in the year 2010. This leads to gender-specific estimates of the coefficient of risk-aversion and the weight of health in the utility function.…”

“…Conceptually, our paper is also related to a strand of recent studies utilizing the health deficit approach to (re-)investigate the Preston curve (Dalgaard and Strulik, 2014), the historical evolution of retirement (Dalgaard and Strulik, 2013), the education gradient (Strulik, 2012), ageconsumption profiles (Strulik, 2015c), the role of adaptation for health behavior and health outcomes (Schünemann et al, 2015), and the optimal design of social welfare systems (Grossmann and Strulik, 2015).…”