Optimal Health and Retirement Policy Under Biologically Founded Human Ageing

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This project integrates into modern macroeconomics a biologically founded process of individual ageing, understood as the stochastic and individual-specific deterioration of the functioning of body and mind. The new modeling makes it possible to investigate theoretically and quantitatively the effects of health and retirement policy on the distribution of income and health of the young and elderly. In particular it allows us to search for the (constrained-) optimal design of the public (or publicly regulated) insurance system that citizens would prefer behind the veil of ignorance, i.e.\ before their own life history is revealed. These results in turn are helpful in order to assess whether current public insurance policy (in Germany or Switzerland) establishes a desirable division of the human life cycle into work and retirement and whether it provides too much or too little health care for the young and for the elderly.