Self-protection against a health risk and saving: an analysis of income and health effects

This study considers both an atemporal (one period) and an intertemporal (two period, with savings) model to examine the effects of income and health on self-protection. We identify clear conditions on risk preferences which imply the normality (or inferiority) of self-protection; these conditions are essentially the same in both the atemporal and intertemporal models. The effects of health on self-protection are more complicated: dynamic versus static matters, and the effects depend, in particular, on whether the individual is correlation (between health and consumption) loving or correlation averse.