Preventive health and active ageing: the elderly are not a burden

Governments concerned with public finance are introducing reforms to push their citizens to remain in the labor market beyond the normal retirement age. We build a stylized theoretical framework in which we show that the labor supply among older workers and preventive health investment go hand in hand. In particular, those workers with the highest levels of productivity are those who remain longer in the labor market and, at the same time, who invest more in preventive health. We also find that a certain level of productivity in the health sector emerges as a prerequisite for active ageing. Furthermore, an increase in such productivity leads to growth in the effective labor supply, leading to an increase in demand for health care, while liberating additional resources for the non-health sectors