Aging society, health and the environment

Abstract

Both environmental quality and health care expenditure are determinants of health and life expectancy, but the support for them appears to be different according to the electors' age, with a relatively larger support for health expenditure among the elderly as it is generally effective on a shorter horizon than environmental maintenance. With population aging, the political support for health care expenditure is then self-reinforcing. We cast this issue in an overlapping generations model with endogenous longevity, where lifespan depends on health care expenditure and environmental quality. We compare the long run outcomes for health care expenditure, environmental quality, lifespan, consumption and capital accumulation of an economy where agents vote over health spending and environmental maintenance, with those chosen by a social planner who takes into account also the welfare of future generations. The role played by other factors, such as the propensity for smoothing consumption or the degree of annuity markets, is also highlighted. Empirical evidence of age-biased environmental care is provided.