Mortality and Morbidity Risk Reduction: An Empirical Life-cycle Model of Demand with Two Types of Age Effects

We develop and test an empirical model of individuals’ intertemporal demands for health risk-mitigation programs over the remaining years of their lives. We estimate this model using data from an innovative national survey of demand for preventative health care. We find qualified support for the Erhlich (2000) life-cycle model, which predicts that individuals expect to derive increasing marginal utility from reducing health risks that come to bear later in their lives. However, we also find that as individuals age, there appears to be a systematic downward shift in this schedule of marginal utility for risk reduction at future ages. Our model improves upon earlier work by differentiating between the respondent’s current age and the future ages at which they would experience adverse health states. Using age-specific demand schedules, we simulate age-specific values for avoided future statistical health states for risk mitigation policies with various latency periods. Our empirical results contribute to the debate about whether a “senior death discount” should be employed in public policy-making with respect to health risks. JEL Classifications: I12, J17, J28, J78