Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 17: Comparative Dynamics in Health Economics: Some Useful Results

Per-Olov Johansson () and Karl-Gustav Löfgren
Additional contact information
Per-Olov Johansson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Abstract: In analysis of atemporal models, comparative statics experiments are typically carried out, often employing envelope properties, such as Roy's identity, Hotelling's lemma and Shephard's lemma, in order to simplify the analysis. In analysis of dynamic models, such experiments are seldom undertaken because of the complexity involved. In this note, we illustrate how to employ dynamic envelope properties in order to arrive at surprisingly simple comparative dynamics results in optimal control theory models. We also extend the envelope theorem to an infinite horizon problem with fundamental time dependency, and apply the result to parametric changes in death risks and health production functions.

Keywords: Dynamic envelope theorem; risk; health; comparative dynamics

JEL-codes: I10; D61; D81; C61

14 pages, May 1994

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