This paper extends the job creation–job destruction approach to the labor market to take into account a deterministic finite horizon. As hirings and separations depend on the time over which investment costs can be recouped, the life-cycle setting implies age-differentiated labor-market flows. While search by the unemployed falls with age, the separation rate is rather U-shaped over the life cycle. Worker heterogeneity in the context of undirected search implies an intergenerational externality, which is not eliminated by the Hosios condition. We show that age-specific policies are required to attain the first-best allocation.

Using a general equilibrium heterogeneous agent model featuring health production, we quantify the contribution of health price in explaining cross-country differences in health expenditures and health status. Considering other country-specific explanatory factors, US health prices are estimated to be 33% higher than those of European countries. This price differential explains more than 60% of the difference in health expenditures and more than half of the difference in health status between Europe and the United States. Despite its large impact at the aggregate level, these price differences increase the lifetime cost of living of Americans by 2 percentage points.