A Note on a Simple Model of Health Investment (original) (raw)
Related papers
2005
We are grateful to Cristina Hernandez-Quevedo and Teresa Bago d'Uva for their research assistance in preparing the empirical results for the ECHP. The ECHP UDB -version of December 2003 was supplied by Eurostat.
Comparative dynamics in a health investment model
Journal of Health Economics, 1999
The method of comparative dynamics fully exploits the intertemporal structure of optimal control models. I derive comparative dynamic results in a simplified demand for health model. The effect of a change in the depreciation rate on the optimal paths for health capital and investment in health is studied by use of a phase diagram.
A Contribution to Health Capital Theory
I present a theory of the demand for health, health investment and longevity, building on the human capital framework for health and addressing limitations of existing models. I predict a negative correlation between health investment and health, that the health of wealthy and educated individuals declines more slowly and that they live longer, that current health status is a function of the initial level of health and the histories of prior health investments made, that health investment rapidly increases near the end of life and that length of life is finite as a result of limited life-time resources (the budget constraint). I derive a structural relation between health and health investment (e.g., medical care) that is suitable for empirical testing.
The effect of medical care on health capital
METU Studies in Development, 2018
This paper analyzes the effect of medical care on the stock of health capital by estimating the health investment production function. An ordered probit model for the stock of health with instrumental variables is estimated using the Two-Stage Residual Inclusion method. We argue that risk tolerance and the opportunity cost of time are suitable instruments for the change in medical care consumption. In contrast to majority of the empirical work, which does not uncover that medical care has a positive effect on the stock of health, the results suggest that physician visits significantly increases the probability of excellent health (or decreases the probability of poor health), in accordance with Grossman’s (1972a) demand for health capital model.
The Grossman model after 40 years
The European Journal of Health Economics, 2012
This editorial presents a critical review of the health model pioneered by Michael Grossman (MGM) in 1972 [8]. It argues that whereas the MGM has great charm for economists, it fails to achieve acceptance by interested laypersons and policy makers. The main reasons for this failure are: (1) the assumption of a long and fixed planning horizon, (2) a fixed ratio between individuals healthcare expenditure and the cost of their own health-enhancing efforts regardless of their state of health, and (3) their presumed ability to restore the state of health deemed optimal at a speed that does not depend on their state of health. An alternative formulation emphasizing the stochastic nature of health production is sketched that conceptually provides solutions to these three problems. In addition, it permits discarding a popular medical argument that seems to undermine the very basis of welfare analysis applied to health by claiming preferences to be unstable: ''As long as you are healthy, you don't give a damn, but as soon as you are sick, you are prepared to sacrifice everything to restore your health.'' The editorial concludes by outlining a research program that may help health economists break away from their MGM fixation.