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Institute for Fiscal Studies -
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This paper presents a model of health investments over the life cycle. Health affects both longevity and provides flow utility. We analyze the interplay between consumption choices and investments in health by solving each household's dynamic optimization problem to obtain predictions on health investments and consumption choices over the lifecycle. Our model does a good job of matching the distribution of medical expenses across the households in the sample. We use the model to examine the effects of several policies on patterns of wealth and mortality.