SUMMARY OF THEORETICAL IMPLICATIONS steady state

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SUMMARY OF THEORETICAL IMPLICATIONS steady
state
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SUMMARY OF THEORETICAL IMPLICATIONS

• When there are a
  two-way causality between E and H, and time
  preferences affect the two stocks in the same
  direction
• So what?

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Comparative dynamics - simulation

• DYNAMICS
• Above we analysed the effects on steady state of
  a change in time preferences. Analyses of
  trajectories when exogenous variables change is
  more difficult. One alternative is state-phase
  analysis
• This not achievable for non-autonomous systems
  (explicit time dependence)
• Another alternative is to use simulation
  technique (there are mathematical methods which
  are applicable, though Ried, 1998)

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HUMAN CAPITAL the relationship between E and H

• Trajectories
• Investment trajectories can be derived from

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Comparative dynamics - simulation

• Illustration Simulation working paper Bolin et
  al. (2005) (preliminary work)
• Specification (assuming dominant efficiency
  effect in the production of health investments,
  and vice versa)

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Comparative dynamics - simulation

• Illustration Simulation working paper Bolin et
  al. (2005)
• Calibration so that hump shaped educational
  capital curve was obtained, and a downward
  sloping health-capital curve.

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Comparative dynamics - simulation

• Simulation, Parametrization

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Comparative dynamics - simulation
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HUMAN CAPITAL extensions

• Health capital and health capital investments in
  a Nash-bargaining family (JHE, Bolin et al
  2001)
• St
• Implications the income-dependence of child
  health partly determines outside opportunities

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HUMAN CAPITAL extensions

• Nash-bargaining family, results
• Outside opportunities affect allocation of
  investments in health capital inside the family
• The treat points can also be interpreted as
  non-cooperative outcomes INSIDE the family
• The decision-making process assumes cooperation
  on behalf of the parties, but there are
  incentives for ex-post cheating, i.e., when one
  party has made irrevocable decisions the other
  party may find it in his or her interest not to
  follow the agreement
• There are arguments for that the incentives for
  cheating are not that strong repeated games,
  punishment and reputation

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HUMAN CAPITAL extensions

• Health capital and health-capital investments
  when family members act strategically (JHE, Bolin
  et al. 2002)
• Spouses solve maximisation problems separately,
  assuming that each spouse is able to produce
  investments in the spouses health (Seirstad and
  Sydsaeter, 1987)
• The usefulness of this strategic optimum is that
  it can model, for instance, the situation at
  divorce when parents still have incentives for
  investing in child health (and other components
  of human capital) (JLE Weiss and Willis, 1985)

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HUMAN CAPITAL extensions

• Strategic family, results
• Inefficient investments in spousal health
• Inefficient investments in child health
• Reason Public goods and external effects -
• Mechanisms that will mitigate this inefficiency
  regarding investments in child health (or other
  parts of the stock of human capital)
• Remains to be done assume that one spouse has a
  first-mover advantage Stackelberg equilibrium
• Possible source of this husbands on average are
  older than their wives and, hence, they have
  already made decisions concerning their degree of
  attachment to the labour market
• To the extent that investments in child human
  capital is time-consuming this will have
  implications for the amount of investments

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HUMAN CAPITAL extensions

• Health capital and health-capital investments
  when an employer has incentives for investing in
  employee health (JHE, Bolin et al. 2002)
• Assumption the employer can invest in the health
  of the employee the employer seeks to maximise
  the present value of the caompany
• Formally
• Where K is physical capital

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HUMAN CAPITAL extensions

• Optimality for the employers demand for employee
  health
• The higher the value of the marginal product, the
  healthier the employee

The net benefit accruing to the employer from an
additional unit of employee health
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HUMAN CAPITAL extensions

• Uncertainty Liljas (JHE, 1998) A recent paper
  by Laporte and Ferguson (JPE, 2007)
• Liljas approach involves treating the THE STOCK
  OF HEALTH as a stochastic variable
• The approach consistent with a capital
  accumulation model must involve stochastic
  changes in the stock that works through changes
  in the depreciation rate
• The approach taken Laporte and Ferguson
• This involves a dynamic optimisation problem with
  a stochastic differential equation for the
  movement of the stock

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HUMAN CAPITAL extensions

• Assume that there exist physiologically optimal
  values regarding for instance weight and
  exercise, and that deviations from these optima
  represent a negative health investment
• Formally (W is weight)
• Weight becomes an additional state variable.
  Equation of motion for weight
• Levy (JHE, 2002) unstable time-path of weight
  rational eating can lead to underweightness/overwe
  ightness

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HUMAN CAPITAL extensions

• A similar analysis can be done for physical
  activity
• st

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Health and education a European example

• Institutional differences and human capital a
  European perspective
• Most studies on institutional differences have
  been performed on US data
• The Survey of Health and Retirement in Europe
  SHARE is the first longitudinal cross-country
  data for Europe.
• The objectives of SHARE
• To facilitate research concerning the various
  effects of the ageing population
• Example of the relationship between attained
  education and health from the SHARE data

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The relationship between health and education
the SHARE data

• Focuses the 50 populations in Europe
• Eleven countries have contributed data to the
  2004/5 SHARE baseline study. They are a balanced
  representation of the various regions in Europe,
  ranging from Scandinavia (Denmark and Sweden)
  through Central Europe (Austria, France, Germany,
  Switzerland, Belgium, and the Netherlands) to the
  Mediterranean (Spain, Italy and Greece).
• Human capital related issues are included health
  (various measures) and attained education
• About 27.000 individuals participated in the
  2004/2005 wave.
• The largest (in monetary units) social-science
  project that has ever been funded by the European
  Commission.

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The relationship between health and education
the SHARE data

• Findings from the SHARE data
• Education keeps us fit Within all 11 countries,
  there is a strong relation between health and
  health behaviour and socioeconomic status. For
  instance, compared to individuals with a higher
  education, individuals with a low education are
  70 percent more likely to be physically inactive
  and 50 percent more likely to be obese.
• Low wealth, particularly in the northern
  countries of Europe.

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The relationship between health and education
the SHARE data
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The relationship between health and education
the SHARE data

• HERE SHOULD HISTOGTRAMS OVER HEALTH BY
  EDUCATIONAL GROUP BE

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Assignments

• Background the ongoing demographic transition
  will make questions regarding the formation of
  human capital increasingly important. This is so
  since human capital is one important determinant
  of economic growth
• Assignment, alternative 1 Theoretical modelling
  of parental investments in child human capital
• Issues
• Altruism
• Competition between siblings
• E.g., the provision of informal care
• Strategic behaviour between parents and children
• E.g., the provision of informal care
• The lifespan what happens when parents die?

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Assignments

• Assignment, alternative 2 Timing of human
  capital investments when technologies for making
  investments are improving over time what is the
  importance of the stock of education? Are the
  more educated less or more inclined to postpone
  investments?

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•