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Health Prevention and Savings: How to Deal with Fatalism?

Johanna Etner and Meglena Jeleva
Annals of Economics and Statistics
No. 121/122 (June 2016), pp. 67-90
Published by: GENES on behalf of ADRES
DOI: 10.15609/annaeconstat2009.121-122.67
Stable URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.121-122.67
Page Count: 24
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Health Prevention and Savings: How to Deal with Fatalism?
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Abstract

In this paper, we first analyze the trade-off between primary prevention and savings when individuals face health (long-term care) risk. We suppose that there is no private insurance market for this risk and consider two risk management tools: primary prevention and savings. We emphasize the role of risk perception and, more precisely, we focus our discussion on the existence of a type of individuals that we call fatalists. Secondly, we analyze the role of risk perception on long-term care public policy. We propose to combine subsidies for prevention with a social insurance co-payment for long-term care expenditures. We show that the presence of fatalists is crucial in the optimal policy design. JEL: D91, I12, I18. / KEY WORDS: Health Risk, Primary Prevention, Long Term Care, Savings.

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