nep-hea New Economics Papers
on Health Economics
Issue of 2006‒02‒26
twenty-one papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Kidney Exchange with Good Samaritan Donors: A Characterization By Tayfun Sönmez; M. Utku Ünver
  2. The Impact of Low Income on Child Health: Evidence from a Birth Cohort Study By Simon Burgess; Carol Propper; John A. Rigg
  3. Health Supplier Quality and the Distribution of Child Health By Simon Burgess; Carol Propper; John A. Rigg
  4. Mother's Education and Child Health: Is There a Nurturing Effect? By Yuyu Chen; Hongbin Li
  5. Health and Economic Behaviour: a Critical Survey of the Literature By Silvia Balia
  6. Longer Life, Higher Welfare? By Michael Grimm; Kenneth Harttgen
  7. Games that Doctors Play Two-layered agency problems in a medical system By Johann Behrens; Hartmut Kliemt; M. Vittoria Levati; Werner Güth
  8. Further evidence about alcohol consumption and the business cycle By C. Vilaplana; José M. Labeaga; S. Jiménez-Martín
  9. The Impact of Foreign Direct Investment in Japan: Case Studies of the Automobile, Finance, and Health Care Industries By Ralph Paprzycki
  10. Life is Cheap: Using Mortality Bonds to Hedge Aggregate Mortality Risk By Leora Friedberg; Anthony Webb
  11. The Roles of High School Completion and GED Receipt in Smoking and Obesity By Donald S. Kenkel; Dean R. Lillard; Alan D. Mathios
  12. Regulating Advertisements: The Case of Smoking Cessation Products By Rosemary J. Avery; Donald S. Kenkel; Dean R. Lillard; Alan D. Mathios
  13. Time to Eat: Household Production Under Increasing Income Inequality By Daniel S. Hamermesh
  14. Typically Unobserved Variables (TUVs) and Selection into Prenatal Inputs: Implications for Estimating Infant Health Production Functions By Nancy E. Reichman; Hope Corman; Kelly Noonan; Dhaval Dave
  15. Perverse Incentives in the Medicare Prescription Drug Benefit By David McAdams; Michael Schwarz
  16. Surplus Appropriation from R&D and Health Care Technology Assessment Procedures By Tomas J. Philipson; Anupam B. Jena
  17. Valuation in Over-the-Counter Markets By Darrell Duffie; Nicolae Garleanu; Lasse Heje Pedersen
  18. The Supply of Physician Services in OECD Countries By Jeremy Hurst; Steven Simoens
  19. Responses of Consumers to the Mandatory Disclosure of Information: Evidence from Natural Experiments in Japanese Inter-brand Cigarette Demands By Junmin Wan
  20. R&D in the Pharmaceutical Industry: A World of Small Innovations By Beatriz Domínguez; Juan José Ganuza; Gerard Llobet
  21. Healthy or unhealthy slogans: that's the question... By Adams, L.; Geuens, M.

  1. By: Tayfun Sönmez (Boston College); M. Utku Ünver (University of Pittsburgh)
    Abstract: We analyze mechanisms to kidney exchange with good samaritan donors where exchange is feasible not only among donor-patient pairs but also among such pairs and non-directed alturistic donors. We show that you request my donor-I get your turn mechanism (Abdulkadiroglu and Sonmez [1999]) is the only mechanism that is Pareto efficient, individually rational, strategy-proof, weakly neutral and consistent.
    Keywords: Kidney exchange, matching, strategy-proofness, consistency.
    Date: 2006–02–13
  2. By: Simon Burgess; Carol Propper; John A. Rigg
    Abstract: There is a growing literature that shows that higher family income is associated with better health for children. Wealthier parents may have more advantaged children because they have more income to buy health care or because parental wealth is associated with beneficial behaviours or because parental health is associated with both income and children¿s health. The policy implications of these transmission mechanisms are quite different. We attempt to unpick the correlation between income and health by examining routes by which parental disadvantage is transmitted into child disadvantage. Using a UK cohort study that has rich information on mother¿s early life events, her health, her behaviours that may affect child health, and her child¿s health, we examine the impact of being in low income compared to that of mother child health related behaviours and mother¿s own health on child health. We find children from poorer households have poorer health. But we find the direct impact of income is small. A larger role is played by mother¿s own health and events in her early life. No clear role is played by mother child health production behaviours.
    Keywords: child health, income, maternal health, tranmission mechanisms
    JEL: I1
    Date: 2004–05
  3. By: Simon Burgess; Carol Propper; John A. Rigg
    Abstract: There is emerging evidence to suggest that initial differentials between the health of poor and more affluent children in the UK do not widen over early childhood. One reason may be that through the universal public funded health care system all children have access to equally effective primary care providers. This paper examines this explanation. The analysis has two components. It first examines whether children from poorer families have access to general practitioners of a similar quality to children from richer families. It then examines whether the quality of primary care to which a child has access has an impact on their health at birth and on their health during early childhood. The results suggest that children from poor families do not have access to markedly worse quality primary care, and further, that the quality of primary care does not appear to have a large effect on differentials in child health in early childhood.
    Keywords: primary care quality, child health
    JEL: I12
    Date: 2005–06
  4. By: Yuyu Chen; Hongbin Li
    Abstract: In this paper, we examine the effect of maternal education on the health of young children by using a large sample of adopted children from China. As adopted children are genetically unrelated to the nurturing parents, the educational effect on them is most likely to be the nurturing effect. We find that the mother's education is an important determinant of the health of adopted children even after we control for income, the number of siblings, health environments, and other socioeconomic variables. Moreover, the effect of the mother's education on the adoptee sample is similar to that on the own birth sample, which suggests that the main effect of the mother's education on child health is in post-natal nurturing. Our work provides new evidence to the general literature that examines the determinants of health and that examines the intergenerational immobility of socioeconomic status.
    JEL: I12 I21 O15
    Date: 2006–02
  5. By: Silvia Balia
    Abstract: The purpose of this paper is to give a brief overview of the relevant literature on health economics. Theoretical and empirical researches are reviewed to examine the traditional perception of health and pro- vide some general intuition of why the study of the individual eco- nomic behaviour is important in the ¯eld of health. Health, wealth and lifestyles are intimately linked through a complex bidirectional re- lationship. Economists have contributed much at its understanding and have overcome the limits of the medical and epidemiological approaches. This survey concentrates on the main estimation problems found in the health production function approach. Econometric methods that take account of reverse causation, unobservable heterogeneity and endogene- ity are needed to recover the genuine causal e®ect of socio-economic factors and health-related behaviours on health. Finally, this survey looks at inequality in health as an urgent public interest issue and sug- gests to disentangle the causes of health inequalities from an economic perspective.
    JEL: I10
    Date: 2005
  6. By: Michael Grimm; Kenneth Harttgen
  7. By: Johann Behrens; Hartmut Kliemt; M. Vittoria Levati; Werner Güth
    Abstract: Medical doctors act as agents of their patients by either treating them directly or referring them to other more or differently specialized doctors, who thereby become "agents of agents". The main aim of this paper is to model central aspects of such two-layered agency relations in the medical sector. On the basis of our model, we draw some tentative conclusions concerning policy issues. In particular, we suggest relying on a strict separation of roles between diagnostic and therapeutic agents with counseling practitioners acting as gate-keepers of the medical system.
    JEL: I10 J40
    Date: 2006–01
  8. By: C. Vilaplana; José M. Labeaga; S. Jiménez-Martín
    Abstract: The main goal of this paper is to test whether macroeconomic conditions a¤ect alcohol consumption using data from the Behavioral Risk Factor Surveillance System for the period 1987-2003. We try to control unobserved heterogeneity by relying on the construction of pseudo-panel data from the different cross-sections available. Our results indicate that when we do not take into account unobserved heterogeneity, the unemployment rate is signifficant and reduces the probability of becoming drinker and the number of alcoholic beverages consumed. However, once we estimate the model using cohort data, controlling for both observed and unobserved heterogeneity, the unemployment rate becomes non-signifficant. This implies that unobserved effects are important when explaining alcohol consumption. As a result, inferences obtained without controlling for them should be interpreted with caution.
  9. By: Ralph Paprzycki
    Abstract: Having historically received very little foreign direct investment, Japan has experienced a substantial increase in such inflows in recent years. This paper analyzes the impact of the growing presence of foreign firms on the Japanese economy through detailed case studies on the automobile, finance, and health care industries. The wholesale & retail and the telecommunications sector are also briefly examined. The case studies show that in the sectors considered, foreign firms in one way or another are contributing to a greater degree of competition, are exposing domestic firms to global best practice, and are increasing the range of products and services available in Japan. In many of the sectors, they are also contributing to changes in industry structure and employment practices. The case studies thus illustrate that foreign direct investment - even at its present levels, which, although large by Japanese standards, are still low in international comparison - can be an important catalyst for change and hence help to reinvigorate the Japanese economy.
    Date: 2006–02
  10. By: Leora Friedberg; Anthony Webb
    Abstract: Using the widely-cited Lee-Carter mortality model, we quantify aggregate mortality risk as the risk that the average annuitant lives longer than is predicted by the model, and we conclude that annuity business exposes insurance companies to substantial mortality risk. We calculate that a markup of 3.7% on an annuity premium (or else shareholders’ capital equal to 3.7% of the expected present value of annuity payments) would reduce the probability of insolvency resulting from uncertain aggregate mortality trends to 5% and a markup of 5.4% would reduce the probability of insolvency to 1%. Using the same model, we find that a projection scale commonly referred to by the insurance industry underestimates aggregate mortality improvements. Annuities that are priced on that projection scale without any conservative margin appear to be substantially underpriced. Insurance companies could deal with aggregate mortality risk by transferring it to financial markets through mortality-contingent bonds, one of which has recently been offered. We calculate the returns that investors would have obtained on such bonds had they been available over a long period. Using both the Capital and the Consumption Capital Asset Pricing Models, we determine the risk premium that investors would have required on such bonds. At plausible coefficients of risk aversion, annuity providers should be able to hedge aggregate mortality risk via such bonds at a very low cost.
    JEL: G12 G22 G23 J11 J14
    Date: 2006–01
  11. By: Donald S. Kenkel; Dean R. Lillard; Alan D. Mathios
    Abstract: We analyze data from the National Longitudinal Survey of Youth 1979 to explore the relationships between high school completion and the two leading preventable causes of death – smoking and obesity. We focus on three issues that have received a great deal of attention in research on the pecuniary returns to schooling. First, we investigate whether GED recipients differ from other high school graduates in their smoking and obesity behaviors. Second, we explore the extent to which the relationships between schooling and these health-related behaviors are sensitive to controlling for family background measures and cognitive ability. Third, we estimate instrumental variables (IV) models of the impact of schooling on smoking and obesity. Although our IV estimates are imprecise, both the OLS and IV results tend to suggest that the returns to high school completion include a reduction in smoking. We find little evidence that high school completion is associated with a lower probability of being overweight or obese for either men or women. The results also suggest that the health returns to GED receipt are much smaller than the returns to high school completion.
    JEL: I1 I2
    Date: 2006–01
  12. By: Rosemary J. Avery; Donald S. Kenkel; Dean R. Lillard; Alan D. Mathios
    Abstract: In this paper we investigate how direct-to-consumer (DTC) advertising of pharmaceutical products in affected by regulations of the Food and Drug Administration and by market conditions. We focus on a relatively under-studied segment of the pharmaceutical market -- the market for smoking cessation products. Because of their proven effectiveness, these products could be the key to meeting public health goals to reduce smoking. However, in many ways, smoking cessation products have been more heavily regulated than cigarettes. Our empirical analysis uses data on advertising expenditures and data from an archive of print advertisements. The archive includes all smoking cessation product advertisements that appeared in over 13,000 issues of 28 magazines between January 1985 and May 2002. Our study period begins shortly atfer the first nicotine replacement product was introduced, and covers the evolution of the market as new products are introduced while some of the older products move from prescription to over-the-counter (OTC) status. OTC status eases the disclosure requirements imposed on advertisements of prescription pharmaceuticals, substantially reducing the costs of a print advertisement. Our results suggest that OTC status is associated with an increase in advertising expenditures and the number and pages of magazine advertisements. A current proposal to reduce disclosure requirements on all DTC advertisements of prescription drugs could have similar effects. Our results also suggest that advertising increase with the introduction of new products and with market competition.
    JEL: I1 L5
    Date: 2006–02
  13. By: Daniel S. Hamermesh
    Abstract: Eating requires the food materials that make up meals and also time devoted to buying food, preparing meals and eating them, and cleaning up afterwards. Using time-diary and expenditure data for the U.S. for 1985 and 2003, I examine how income and time prices affect time and goods input into this household-produced commodity. Focusing on these two years, between which income and earnings inequality increased, allows examining how household production is affected by changing economic opportunities. The results demonstrate that both inputs into eating increase with income, and that higher time prices at a given level of income reduce time inputs. Over this period the goods intensity of producing this commodity increased, especially at the lower part of the income distribution, and the average time input dropped substantially. The results are consistent with goods-time substitution in eating being relatively difficult and with substitution becoming relatively more difficult as production expands. This is confirmed by direct estimates using matched time-use and food spending data on the same households for 2003 and 2004. The findings imply that projecting food expenditures alone overestimates the amount spent on food in a growing economy.
    JEL: J22 Q11
    Date: 2006–02
  14. By: Nancy E. Reichman; Hope Corman; Kelly Noonan; Dhaval Dave
    Abstract: We use survey data, augmented with data collected from respondents' medical records, to explore selection into prenatal inputs among a group of urban, mostly unmarried mothers. We explore the extent to which several theoretically important but typically unobserved variables (representing wantedness, taste for risky behavior, and maternal health endowment) are likely to bias the estimated effects of prenatal inputs (illicit drug use, cigarette smoking, and prenatal care) on infant health outcomes (birth weight, low birth weight, and abnormal conditions). We also explore the consequences of including other non-standard covariates and of using self-reported inputs versus measure of inputs that incorporate information from medical records. We find that although the typically unobserved variables have strong associations with both inputs and outcomes with high explanatory power, excluding them from infant health production functions does not substantially bias the estimated effects of prenatal inputs. The bias from using self-reported measure of the inputs is much more substantial. The results suggest promising new directions for research on the production of infant health.
    JEL: I1
    Date: 2006–02
  15. By: David McAdams; Michael Schwarz
    Abstract: We analyze some of the perverse incentives that may arise under the current Medicare prescription drug benefit design. In particular, risk adjustment for a stand-alone prescription drug benefit creates perverse incentives for prescription drug plans' coverage decisions and/or pharmaceutical companies' pricing decisions. This problem is new in that it does not arise with risk adjustment for other types of health care coverage. For this and other reasons, Medicare's drug benefit requires especially close regulatory oversight, now and in the future. We also consider a relatively minor change in how the benefit is financed that could lead to significant changes in how it functions. In particular, if all plans were required to charge the same premium, there would be less diversity in quality but also less budgetary uncertainty and less upward pressure on drug prices.
    JEL: I1
    Date: 2006–02
  16. By: Tomas J. Philipson; Anupam B. Jena
    Abstract: Given the rapid growth in health care spending that is often attributed to technological change, many private and public institutions are grappling with how to best assess and adopt new health care technologies. The leading technology adoption criteria proposed in theory and used in practice involve so called "cost-effectiveness" measures. However, little is known about the dynamic efficiency implications of such criteria, in particular how they influence the R&D investments that make technologies available in the first place. We argue that such criteria implicitly concern maximizing consumer surplus, which many times is consistent with maximizing static efficiency after an innovation has been developed. Dynamic efficiency, however, concerns aligning the social costs and benefits of R&D and is therefore determined by how much of the social surplus from the new technology is appropriated as producer surplus. We analyze the relationship between cost-effectiveness measures and the degree of surplus appropriation by innovators driving dynamic efficiency. We illustrate how to estimate the two for the new HIV/AIDS therapies that entered the market after the late 1980's and find that only 5% of the social surplus is appropriated by innovators. We show how this finding can be generalized to other existing cost-effectiveness estimates by deriving how those estimates identify innovator appropriation for a set of studies of over 200 drugs. We find that these studies implicitly support a low degree of appropriation as well. Despite the high annual cost of drugs to patients, very low shares of social surplus may go to innovators, which may imply that cost-effectiveness is too high in a dynamic efficiency sense.
    JEL: I1
    Date: 2006–02
  17. By: Darrell Duffie; Nicolae Garleanu; Lasse Heje Pedersen
    Abstract: We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply shocks cause prices to jump, and then "recover" over time, with a time signature that is exaggerated by search frictions. We discuss a variety of empirical implications.
    JEL: G0 G1 G12
    Date: 2006–02
  18. By: Jeremy Hurst; Steven Simoens
    Abstract: The delivery of an appropriate quantity and quality of health care in an efficient way requires, among other things, matching the supply with the demand for the services of physicians, over time. Such matching has led to very different levels of physicians per million population across OECD countries – because of variations, among other things, in: morbidity and mortality, health expenditure as a share of GDP and the design of health systems. In addition, there are signs that a higher density of physicians is found in countries which have left the supply of physicians mainly to the market whereas lower density is found in countries which have planned the intake to medical schools centrally over many years... Pour qu'un système de santé puisse assurer de façon efficace un niveau de soins satisfaisant, en quantité comme en qualité, il faut, entre autres choses, que l'offre et la demande de médecins parviennent à s'équilibrer. De ce point de vue, et si l'on en juge d'après le nombre de médecins par million d'habitants, les pays de l'OCDE affichent une grande diversité, pour des raisons qui tiennent notamment à des différences dans les taux de morbidité et de mortalité, les dépenses de santé en proportion du PIB et la conception des systèmes de santé. En outre, il semble que la densité médicale soit plus élevée dans les pays qui ont pour l'essentiel laissé au marché le soin de réguler l'offre de médecins, et moins élevée dans ceux où l'accès aux études de médecine a longtemps été encadré à l'échelon national...
    Date: 2006–01–16
  19. By: Junmin Wan (Osaka School of International Public Policy, Osaka University)
    Abstract: I estimated inter-brand cigarette demands with nicotine, tar content and policy event information in Japan during 1950-84. The demand for all brands increased but the demand for plain (non-filter) brands decreased due to the dissemination ofgA Note about Health Damage from Smoking h in 1964. The demand for all brands increased but the demand for high-nicotine brands decreased due to the disclosure of nicotine and tar content in 1967 and the labeling warnings in 1972, however consumers had still preferred high-nicotine brands after 1972. Contrastively, the demand for high-tar brands increased in 1967 but decreased in 1972, and consumers had switched to prefer low-tar brands after 1972. Disclosure did not reduce the intake of nicotine but reduced the intake of tar, accordingly disclosure may benefit consumers by reducing the health risk as tar causes cancers. In line with changes in inter-brand demands, the monopolistic firm discontinued old products with poorer quality (plain, high-tar) but provided new better ones (filter-tipped, low-tar).
    Keywords: disclosure, nicotine, tar, cigarette, inter-brand, panel estimation, difference in difference
    JEL: I18 D12 D82
    Date: 2004–06
  20. By: Beatriz Domínguez; Juan José Ganuza; Gerard Llobet
    Abstract: It is commonly argued that in recent years pharmaceutical companies have directed their R&D towards small improvements of existing compounds instead of more risky drastic innovations. In this paper we show that the proliferation of these small innovations is likely to be linked to the lack of market sensitivity of a part of the demand to changes in prices. Compared to their social contribution, small innovations are relatively more profitable than large ones because they are targeted to the smaller but more inelastic part of the demand. We also study the effect of regulatory instruments such as price ceilings, copayments and reference prices and extend the analysis to competition in research.
    Keywords: Health-care, pharmaceuticals, innovation
    JEL: I11 I18 L51 O31
    Date: 2005–12
  21. By: Adams, L.; Geuens, M.
    Abstract: An experiment was conducted to examine the effect in adolescents of different health appeals (healthy versus unhealthy) in ads for healthy and unhealthy perceived foods. The results did not reveal a main effect of product or slogan, but indicated a significant interaction effect between slogan and product. The healthy slogan only led to significantly more positive attitudes and purchase intentions when it promoted a healthy food product. An unhealthy food product received better results in combination with an unhealthy slogan than with a healthy one. This indicates that adolescents react better to ads in which the health appeal is congruent with the health perception of the product. Moreover, we took into account gender and health concern as potential moderators in the relationship between slogan and ad responses. Gender did not lead to different responses to healthy or unhealthy food ads, whereas health concern did interact significantly with the slogan type. Highly concerned adolescents responded more favorably to a healthy slogan in terms of attitudes. A necessary first step seems to be making adolescents more health conscious. A following step is to reinforce their positive attitudes towards healthy foods and turn them into real behavior.
    Date: 2006–02–12

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