nep-hea New Economics Papers
on Health Economics
Issue of 2007‒04‒28
seventeen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Rational reconstruction of frailty-based mortality models by a generalisation of Gompertz' law of mortality By W.J. Willemse; R. Kaas
  2. Consumer Information and Pharmaceutical Prices: Theory and Evidence By Granlund, David; Rudholm, Niklas
  3. Men With Health Insurance and the Women Who Love Them: the Effect of a Husband's Retirement on His Wife's Health Insurance Coverage By Jody Schimmel
  4. The Impact of Health Insurance Availability on Retirement Decision Reversals By Joshua Congdon-Hohman
  5. Social Security Privatization with Income-Mortality Correlation By Shinichi Nishiyama; Kent Smetters
  6. Life-Cycle Asset Allocation with Annuity Markets: Is Longevity Insurance a Good Deal? By Wolfram J. Horneff; Raimond H. Maurer; Michael Z. Stamos
  7. The Importance of Objective Health Measures in Predicting Early Receipt of Social Security Benefits: The Case of Fatness By Richard V. Burkhauser; John H. Cawley
  8. The Responsiveness of Private Savings to Medicaid Long Term Care Policies By Purvi Sevak; Lina Walker
  9. Malaria and Primary Education : A cross-country analysis on primary repetition and completion rates. By Josselin Thuilliez
  10. Value Based Cost Sharing Meets the Theory of Moral Hazard: Medical Effectiveness in Insurance Benefits Design By Mark V. Pauly; Fredric E. Blavin
  11. Cigarette Taxes and Youth Smoking: New Evidence from National, State, & Local Youth Risk Behavior Surveys By Christopher Carpenter; Philip J. Cook
  12. HIV and Sexual Behavior Change: Why Not Africa? By Emily Oster
  13. Housing, health, and happiness By Titiunik, Rocio; Martinez, Sebastian; Gertler, Paul J.; Galiano, Sebastian; Cattaneo, Matias D.
  14. Government expenditures on education, health, and infrastructure : a naive look at levels, outcomes, and efficiency By Trujillo,Lourdes; Gonzalez, Marianela; Estache, Antonio
  15. HIV/AIDS and Poverty in South Africa: a Bayesian Estimation By Fabrice Murtin; Federica Marzo
  16. Medicaid Expenditures and State Budgets: Past, Present, and Future By David Wildasin; James Marton
  17. Does Health cause Schooling or Does Schooling cause Health? By Tiago Neves Sequeira

  1. By: W.J. Willemse; R. Kaas
    Abstract: A generalisation of Gompertz' distribution is proposed, and it is shown that continuous heterogeneous mortality models with Gamma distributed frailty have lifetime random variables distributed as the difference of two such generalised Gompertz random variables. With this result, limitations of existing frailty-based mortality models are identified. The approach taken in this paper allows the frailty distribution to be interpreted as a lifetime reduction distribution and enables application of heterogeneous survival models with a stronger relation to empirically identifiable concepts.
    Keywords: Heterogeneous mortality models; Frailty models; Gompertz distribution; Identifiability.
    JEL: C16 J11
    Date: 2007–04
  2. By: Granlund, David (Department of Economics, Umeå University); Rudholm, Niklas (Department of Economics, Umeå University)
    Abstract: In this paper, the impact of increased consumer information on brand name and generic pharmaceutical prices is analyzed both theoretically and empirically. The theoretical results show that an increase in information is likely to reduce the price of brand name pharmaceuticals, while the results regarding generics are less clear. In the empirical part of the paper, the introduction of the substitution reform in the Swedish pharmaceuticals market in October 2002 is used as a natural experiment regarding the effects of increased consumer information on pharmaceutical prices. The results clearly show that the reform has lowered the price of both brand name- and generic pharmaceuticals.
    Keywords: Pharmaceutical industry; generic competition; generic drugs; brand name drugs
    JEL: D80 D83 I11 L65
    Date: 2007–04–23
  3. By: Jody Schimmel (Mathematica Policy Research, Inc.)
    Abstract: Health insurance coverage in the years prior to retirement is particularly important because it protects the household from the financial risks of uninsurance as well as the health consequences of delaying care while uninsured. While results from the retirement "job lock" literature show that those who would lack coverage after retirement continue to work to maintain benefits, little work has explored the types of health insurance choices made by couples after retirement. It may be difficult for a married man to coordinate continuous coverage for a younger wife whose primary source of coverage has been from the husband, and thus households may pay more for non-group coverage or be exposed to the risks of uninsurance. This paper studies a panel of married couples from the 1992-2004 waves of the Health and Retirement Study (HRS) to study the types of health insurance decisions households make around the time of retirement. Results indicate that households seem to do well at avoiding uninsurance at the time of retirement, but may make high cost choices in order to insure the wife. Men switch into Medicare or coverage from their wife at retirement if they lose their own coverage, but a large fraction of women take-up privately purchased coverage. In fact, the transition from husband’s coverage to privately purchased coverage is twice as large in periods when the husband retires than otherwise. Transitions to uninsurance are lower in periods of retirement than at other times, suggesting that men continue to work if either spouse would lose coverage. Though less risky, insurance purchased in the non-group market is expensive relative to employer-sponsored coverage. Thus, married households may need to increase savings to pay for health insurance that bridges the gap until the wife can claim Medicare at age 65.
    Date: 2006–09
  4. By: Joshua Congdon-Hohman (University of Michigan)
    Abstract: This paper uses the longitudinal aspect of the Health and Retirement Survey to explore the characteristics associated with reversals in retirement (referred to here as "unretirement"). Through the use of survival time analysis, this paper show that health insurance plays a significant role in unretirement decisions. This role is underestimated when a static probit analysis is used alone. The results hold up for a number of different retirement identifiers that are based both on self-reports of retirement and actual work levels. The results are also robust to various definitions of retirement prompted by the difficult question of how to classify partial retirements. The importance of health insurance provision in a retiree’s decision also remains significant when other "shocks" and the prospect of planned unretirement are introduced.
    Date: 2006–10
  5. By: Shinichi Nishiyama (Georgia State University); Kent Smetters (The Wharton School)
    Abstract: While privatizing Social Security can improve labor supply incentives, it can also reduce risk sharing. We simulate a 50-percent privatization using an overlapping-generations model where heterogeneous agents with elastic labor supply face idiosyncratic earnings shocks and longevity uncertainty. When wage shocks are insurable, privatization produces about $30,100 of extra resources for each future household after all transitional losses have been paid. When wages are not insurable, privatization reduces efficiency by about $8,100 per future household. We check the robustness of these results to different model specifications as well as policy reforms and arrive at several surprising conclusions. First, privatization performs better in a closed economy, where interest rates decline with capital accumulation, than in an open economy. Second, privatization also performs better when an actuarially-fair private annuity market does not exist. Third, government matching of private contributions on a progressive basis is not very effective at restoring efficiency and can actually harm.
    Date: 2006–11
  6. By: Wolfram J. Horneff (Johann Wolfgang Goethe-University of Frankfort); Raimond H. Maurer (Johann Wolfgang Goethe-University of Frankfort); Michael Z. Stamos (Johann Wolfgang Goethe-University of Frankfort)
    Abstract: We derive the optimal portfolio choice over the life-cycle for households facing labor income, capital market, and mortality risk. In addition to stocks and bonds, households also have access to incomplete annuity markets offering a hedge against mortality risk. We show that a considerable fraction of wealth should be annuitized to skim the return enhancing mortality credit. The remaining liquid wealth (stocks and bonds) is used to hedge labor income risk during work life, to earn the equity premium, and to ensure estate for the heirs. Furthermore, we assess the importance of common explanations for limited participation in annuity markets.
    Date: 2006–12
  7. By: Richard V. Burkhauser (Cornell University); John H. Cawley (Cornell University)
    Abstract: Theoretical models argue that poor health will contribute to early exit from the labor market and the decision to take early Social Security retirement benefits (Old-Age or OA benefits). However, most empirical estimates of the causal importance of health on the decision to take early OA benefits have been forced to rely on global measures such as self-rated work limitations or self-rated health. We contribute to the empirical literature by using a more objective measure of health, fatness, to predict early receipt of OA benefits. We do so by estimating the causal impact of fatness within an empirical model using the method of instrumental variables, and testing the robustness of our findings using the most common measure of fatness in the social science literature - body mass index - with what is a more theoretically appropriate measure of fatness - total body fat and percent body fat. Overall, our conclusion is that fatness and obesity are strong predictors of early receipt of OA benefits.
    Date: 2006–12
  8. By: Purvi Sevak (Hunter College); Lina Walker (Congressional Budget Office)
    Abstract: This paper examines the extent to which private savings responds to the availability of a social insurance program. We focus on the Medicaid nursing home assistance program and uses variation in state Medicaid policies in the 1960s and 1990s to identify whether household wealth correlates negatively with access to public insurance coverage. We use data from the 1962 and 1970 Survey of Consumer Finances and the 1992 through 2002 Health and Retirement Study. We find that household savings in 1970 was substantially lower in states with easier access to Medicaid assistance and that household savings in the 1990s was lower when access to the Medicaid program was lower.
    Date: 2007–01
  9. By: Josselin Thuilliez (Centre d'Economie de la Sorbonne)
    Abstract: This paper explores the link between P. Falciparum malaria - most of malaria morbidity and mortality is due to the malignant Plasmodium Falciparum - and primary education in terms of school performances at the macroeconomic stage. Cross-country regression analysis shows that the relation between school results (measured by repetition and completion rates) and the P. Falciparum malaria index is strong. The results implies that the achievement of the education Millennium Development Goals will require more than just focusing on expenditure in primary education. It does not imply that resources in education are unnecessary but that increasing resources in education and improving education resources management alone are unlikely to be sufficient. This paper suggests that health conditions and especially diseases that alter cognitive capacities of children such as malaria should be taken into account much more seriously. This study also sees the need to place emphasis on research that will improve the quality of interventions to prevent malaria. Specific education expenditure to face Malaria should be examined in addition to health policies.
    Keywords: Malaria incidence, human capital, development.
    JEL: O15 I10 I20
    Date: 2007–03
  10. By: Mark V. Pauly; Fredric E. Blavin
    Abstract: The conventional theory of optimal coinsurance rates in health insurance in the presence of moral hazard indicates that, in situations of equal risk characteristics, coinsurance should vary if the price-responsiveness or price-elasticity of demand for different medical services varies, and should be larger for the more price responsive services. An alternative theory called "value-based cost sharing" indicates that coinsurance should be lower for services with higher (marginal) benefits relative to costs. This paper reconciles the two views. It shows that, if patient demands are based on correct information on benefits and costs, the conclusion of the conventional view is identical to the conclusion from the value-based approach. If patient demands differ from correct demands, it is shown that optimal coinsurance depends both on the extent and direction of information imperfection and on price-responsiveness or price elasticity. The paper also shows, as an alternative to adjusting coinsurance to deal with information imperfection, that providing better information which affects patient demands can be superior if uninformed patient demands exceed informed patient demands, but value based cost sharing can be superior to providing information (even if the cost of information is minimal) when patient demands fall short of informed demands. An extended numerical example illustrates these points.
    JEL: I11
    Date: 2007–04
  11. By: Christopher Carpenter; Philip J. Cook
    Abstract: Several studies have examined the effects of state cigarette tax increases on youth substance use over the 1990s, with most -- but not all -- finding that higher taxes reduce youth consumption of tobacco. We advance the literature by using data from the 1991-2005 waves of the national Youth Risk Behavior Surveys (YRBS), providing information on over 100,000 high school age youths. We also are the first to make use of hundreds of independently fielded state and local versions of the YRBS, reflecting data from over 750,000 youths. Importantly, these data are to our knowledge the only sources of relevant information on youth smoking that were explicitly designed to be representative of the sampled state or locality. We estimate two-way fixed effects models of the effect of state cigarette taxes on youth smoking, controlling for survey demographics and area and year fixed effects. Our most consistent finding is that -- contrary to some recent research -- the large state tobacco tax increases of the past 15 years were associated with significant reductions in smoking participation and frequent smoking by youths. Our price elasticity estimates for smoking participation by high school youths are generally smaller than previous cross-sectional approaches but are similar to recent quasi-experimental estimates.
    JEL: I1
    Date: 2007–04
  12. By: Emily Oster
    Abstract: The response of sexual behavior to HIV in Africa is an important input to predicting the path of the epidemic and to focusing prevention efforts. Existing estimates suggest limited behavioral response, but fail to take into account possible differences across individuals. A simple model of sexual behavior choice among forward-looking individuals implies that behavioral response should be larger for those with lower non-HIV mortality risks and those who are richer. I estimate behavioral response using a new instrumental variables strategy, instrumenting for HIV prevalence with distance to the origin of the virus. I find low response on average, consistent with existing literature, but larger responses for those who face lower non-HIV mortality and for those who are richer. I also show suggestive evidence, based on a very simple calibration, that the magnitude of behavioral response in Africa is of a similar order of magnitude to that among gay men in the United States, once differences in income and life expectancy are taken into account.
    JEL: I10 J17 O12
    Date: 2007–04
  13. By: Titiunik, Rocio; Martinez, Sebastian; Gertler, Paul J.; Galiano, Sebastian; Cattaneo, Matias D.
    Abstract: Despite the importance of housing for people ' s well-being, there has been little work done to assess the causal impact of housing and housing improvement programs on health and welfare. In this paper the authors help fill this gap by investigating the impact of a large-scale effort by the Mexican government to replace dirt floors with cement floors on child health and adult happiness. They find that replacing dirt floors with cement floors significantly reduces parasitic infestations in young children, reduces diarrhea, reduces anemia, and improves cognitive development. Finally, they also find that this program leave adults substantially better off, as measured by satisfaction with their housing and quality of life and by their significantly lower rates of depression and perceived stress.
    Keywords: Health Monitoring & Evaluation,Disease Control & Prevention,Housing & Human Habitats,Construction Industry,Economic Theory & Research
    Date: 2007–04–01
  14. By: Trujillo,Lourdes; Gonzalez, Marianela; Estache, Antonio
    Abstract: All interested parties seem to agree that it is important to be able to monitor public sector performance at the sectoral level, but most current work based on multi-country databases does not lend itself to country-specific conclusions. This is due to a large extent to major data limitations both on sectoral expenditures and on sectoral outcomes. This paper discusses the related issues and shows what we can do with the current data inspite of the drastic limitations. The main conclusions of the paper are that any efforts to assess country-specific performances in relative terms are likely to be difficult in view of the data problems. A rough sense of performance across sectors can be estimated for groups of countries, allowing some modest benchmarking exercises. These estimates show that low-income countries generally lag significantly behind higher-income countries. Efficiency has improved during the 1990s in energy and education but has not improved significantly in transport.
    Keywords: Transport Economics Policy & Planning,Public Sector Expenditure Analysis & Management,Inequality,Economic Theory & Research,Poverty Monitoring & An alysis
    Date: 2007–05–01
  15. By: Fabrice Murtin (GREDI, Université de Sherbrooke); Federica Marzo (CREST, INSEE)
    Abstract: In this paper we assess the causal impact of HIV/AIDS on monetary poverty using a panel data-set from South Africa and modeling the consequences of the illness on both earnings and transfers. Two major econometric problems are likely to bias the estimation: endogeneity of the HIV/AIDS dummy variable, and autoselection of the individuals participating to the labour market or to transfers networks. We solve both of them by proposing an original framework where we include correlated fixed-effects both in the level and the participation equations, which are estimated simultaneously with original Bayesian methods. The procedure is tested and very well-behaved. Splitting the sample into urban and rural population, we show that HIV/AIDS has a significant but moderate impact on poverty for urban population, because transfers partly compensate the fall of earnings entailed by the decrease in labour market participation. On the contrary, HIV/AIDS has an important impact on poverty for the rural population because it causes a fall of transfers. Surprisingly the effect on earnings is not significant . We argue that those results can be explained by the existence of an efficient public safety net in urban settings, while in contrast private transfers are subject to moral hazard and imperfect commitment that characterize risk-sharing in rural settings.
    Keywords: DHIV/AIDS, MCMC, Selection Models
    JEL: C3 D1 I1
    Date: 2007
  16. By: David Wildasin (Martin School of Public Policy and Administration and Department of Economics, University of Kentucky); James Marton (Martin School of Public Policy and Administration and Department of Economics, University of Kentucky)
    Abstract: Rapid spending growth has made Medicaid a major element in state budgets; financial support from Federal matching grants is now a main component of state government revenues and of intergovernmental fiscal relations. We discuss recent, ongoing, and prospective reforms of intergovernmental finances and regulations, including the 1996 welfare reform, the introduction of Medicare Part D, Section 1115 waivers, SCHIP reauthorization, and a shift to block grants. Each would affect the assignment of responsibilities between the state and Federal governments, the viability of which is questionable due to current and future interstate demographic and policy variation, population aging, and Federal fiscal imbalances.
    Date: 2007–04
  17. By: Tiago Neves Sequeira (Departamento de Gestão e Economia, Universidade da Beira Interior)
    Abstract: Using a panel data approach we investigate whether schooling cause health or health cause schooling. We found evidence that supports the influence of the level of health in increases in education and the influence of education growth in health improvements. Both effects are present in poor countries but not in rich ones.
    Keywords: Education, Health
    JEL: I00 J24 O15 O50
    Date: 2007

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