nep-hea New Economics Papers
on Health Economics
Issue of 2008‒08‒31
nineteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  2. Debt and Health By Pamela Lenton; Paul Mosley
  3. Changes in Immigrants' Body Mass Index with Their Duration of Residence in Germany By Monika Sander
  4. Including quality attributes in a model of health care efficiency: A net benefit approach By Simon Eckermann; Tim Coelli
  5. The In-Hospital Mortality Rates of Slaves and Freemen: Evidence from Touro Infirmary, New Orleans, Louisiana, 1855–1860 By Pritchett, Jonathan B.; Yun, Myeong-Su
  6. The Role of Childhood Health for the Intergenerational Transmission of Human Capital: Evidence from Administrative Data By Salm, Martin; Schunk, Daniel
  7. Being Born Under Adverse Economic Conditions Leads to a Higher Cardiovascular Mortality Rate Later in Life: Evidence Based on Individuals Born at Different Stages of the Business Cycle By van den Berg, Gerard J.; Doblhammer-Reiter, Gabriele; Christensen, Kaare
  8. Optimal Public Policy with Endogenous Mortality By Rangan Gupta; Emmanuel Ziramba
  9. Job loss does not cause ill health By Martin Salm
  10. The Effect of Financial Incentives on Quality of Care: The Case of Diabetes By Anthony Scott; Stefanie Schurer; Paul H. Jensen; Peter Sivey
  11. Mosquitoes: The Long-TermEffects of Malaria Eradication in India By Cutler, David; Fung, Winnie; Kremer, Michael; Singhal, Monica
  12. What Good Is Wealth without Health? The Effect of Health on the Marginal Utility of Consumption By Finkelstein, Amy; Luttmer, Erzo F. P.; Notowidigdo, Matthew J.
  13. Social Interactions and Smoking By Cutler, David; Glaeser, Edward L.
  14. Markets and Uncertainty in Pharmaceutical Development By Scherer, F. M.
  15. Issues of Selection in Human Survivorship: A Theory of Mortality Change from the Mid-Eighteenth to the Early Twenty First Century By Hans Oluf Hansen
  16. Institutions, Diseases and Economic Progress: A Unified Framework By Sambit Bhattacharyya
  17. Subjective Well-Being in the Southern Cone: Health, Income and Family By Alejandro Cid; Daniel Ferres; Máximo Rossi
  18. Is American Health Care Uniquely Inefficient? By Alan M. Garber; Jonathan Skinner
  19. The Effect of Soft Budget Constraints on Access and Quality in Hospital Care By Yu-Chu Shen; Karen Eggleston

  1. By: Sarah Brown; Jenny Roberts; Karl Taylor (Department of Economics, The University of Sheffield)
    Abstract: The concept of the reservation wage has played an important role in labour market theory; particularly in models of job search, labour supply and labour market participation. Despite this core theoretical role, there is a scarcity of empirical research which explores the setting of reservation wages at the individual level. In this paper, we focus on the determinants of reservation wages, with a particular focus on health, which has attracted very little attention despite its importance from a policy perspective. We use data for males from 14 waves of the British Household Panel Survey and estimate an endogenous switching model which predicts reservation wages for the unemployed and market wages for the employed. We employ methods to deal with the endogeneity of health, measurement errors in our self reported health variable and selection into economic activity. Our results suggest that health is an important determinant of selection, both into economic activity and into employment (versus unemployment) but that, once these participation effects are accounted for, health is not a significant determinant of either the reservation wage or the market wage. This casts doubt on the results of a number of previous studies that have failed to appropriately account for selection in models of male wages. Our results have important policy implications since they suggest that poor health is a major cause of economic inactivity.
    Keywords: Endogenous switching models, Health status, Labour market participation, Reservation wages
    JEL: J13 J24
    Date: 2008–02
  2. By: Pamela Lenton; Paul Mosley (Department of Economics, The University of Sheffield)
    Abstract: Debt problems in the UK have recently become much more severe, especially for the lowest income groups, and we examine here their impact on health, using data from the national Families´ and Children´s Survey (FACS). We model the relationship between debt and health as a simultaneous two-way interaction, and find that debt levels have a negative effect on both physical and psychological health. We find that debt repayment structure, defined as the percentage of debt borrowed in high-interest categories, has an impact on health independent of the level of debt. The interaction between debt and health may aggravate the poverty trap, by pushing heavily-indebted low-income people into ill-health, which then makes it difficult for them to acquire or hold on to the steady jobs needed to ease their debt problems. We also find that worry has a negative influence on debt management capacity, and thence on health, which makes it more difficult for those caught in a debt trap to escape from it. Membership of credit unions tends to reduce worry, however, and thereby may facilitate escape from the debt-ill health spiral.
    Keywords: Debt, Health, Random effects ordered probit models
    JEL: G11 I31
    Date: 2008–04
  3. By: Monika Sander
    Abstract: This paper investigates how immigrants’ Body Mass Index (BMI) changes with increasing years since migration in Germany. The data are drawn from three waves (2002, 2004, and 2006) of the German Socio-Economic Panel Study (SOEP). The results indicate a clear increase of the BMI with additional years in Germany for men and women.
    Keywords: Body Mass Index, immigrants, SOEP
    JEL: C23 I12
    Date: 2008
  4. By: Simon Eckermann; Tim Coelli (CEPA - School of Economics, The University of Queensland)
    Date: 2008
  5. By: Pritchett, Jonathan B. (Tulane University); Yun, Myeong-Su (Tulane University)
    Abstract: Using a rich sample of admission records from New Orleans Touro Infirmary, we examine the in-hospital mortality risk of free and enslaved patients. Despite a higher mortality rate in the general population, slaves were significantly less likely to die in the hospital than the whites. We analyze the determinants of in-hospital mortality at Touro using Oaxaca-type decomposition to aggregate our regression results. After controlling for differences in characteristics and maladies, we find that much of the mortality gap remains unexplained. In conclusion, we propose an alternative explanation for the mortality gap based on the selective hospital admission of slaves.
    Keywords: slavery, hospital, Oaxaca-type decomposition, New Orleans, Touro
    JEL: N31 J15 I10
    Date: 2008–08
  6. By: Salm, Martin (University of Mannheim); Schunk, Daniel (University of Zurich)
    Abstract: We use unique administrative German data to examine the role of childhood health for the intergenerational transmission of human capital. Specifically, we examine the extent to which a comprehensive list of health conditions – diagnosed by government physicians – can account for developmental gaps between the children of college educated parents and those of less educated parents. In total, health conditions explain 18% of the gap in cognitive ability and 65% of that in language ability, based on estimations with sibling fixed effects. Thus, policies aimed at reducing disparities in child achievement should also focus on improving the health of disadvantaged children.
    Keywords: health inequality, human capital formation, childhood health, intergenerational mobility
    JEL: J13 I20 I12
    Date: 2008–08
  7. By: van den Berg, Gerard J. (Free University of Amsterdam); Doblhammer-Reiter, Gabriele (University of Rostock); Christensen, Kaare (University of Southern Denmark)
    Abstract: We connect the recent medical and economic literatures on the long-run effects of early-life conditions, by analyzing the effects of economic conditions on the individual cardiovascular (CV) mortality rate later in life, using individual data records from the Danish Twin Registry covering births since the 1870s and including the cause of death. To capture exogenous variation of conditions early in life we use the state of the business cycle around birth. We find a significant negative effect of economic conditions early in life on the individual CV mortality rate at higher ages. There is no effect on the cancer-specific mortality rate. From variation within and between monozygotic and dizygotic twin pairs born under different conditions we conclude that the fate of an individual is more strongly determined by genetic and household-environmental factors if early-life conditions are poor. Individual-specific qualities come more to fruition if the starting position in life is better.
    Keywords: longevity, genetic determinants, health, recession, life expectancy, cardiovascular disease, cancer, lifetimes, fetal programming, cause of death, developmental origins
    JEL: I10 J14 C41 H75 E32 J10 N33 N13 I12 I18
    Date: 2008–08
  8. By: Rangan Gupta (Department of Economics, University of Pretoria); Emmanuel Ziramba (Department of Economics, University of South Africa)
    Abstract: Using a monetary pure-exchange overlapping generations model, where the probability of survival of the young agents depends upon share of government expenditure on health, education and infrastructure, we analyze the welfare-maximizing policy mix between explicit and implicit taxation. We show that increases in the survival probability lead to an increase in the reliance on seigniorage as a welfare maximizing outcome. However, for our results to hold, the seigniorage tax base must be large enough for the benevolent planner to use the inflation tax.
    Keywords: Monetary Pure Exchange Overlapping Generations Model; Probability of Survival; Welfare Maximizing Policy Mix
    JEL: H2 H51 I1 I18
    Date: 2008–08
  9. By: Martin Salm (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: I use longitudinal data from the Health and Retirement Study to estimate the effect of job loss on health for near elderly employees. Job loss is a major cause of economic insecurity for working age individuals, and can cause reduction in income, and loss of health insurance. To control for possible reverse causality, this study focuses on people who were laid off for an exogenous reason - the closure of their previous employers’ business. I find that the unemployed are in worse health than employees, and that health reasons are a common cause of job termination. In contrast, I find no causal effect of exogenous job loss on various measures of health. This suggests that the inferior health of the unemployed compared to the employed could be explained by reverse causality. I also use instrumental variable regression to estimate the effect of loss of health insurance, loss of income, and re-employment on health, and again find no statistically significant effects.
    Date: 2008–08–19
  10. By: Anthony Scott (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Stefanie Schurer (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Paul H. Jensen (Melbourne Institute of Applied Economic and Social Research, The University of Melbournehor-Workplace-Name: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Peter Sivey (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Australia introduced an incentive payment scheme for general practitioners to ensure systematic and high quality care in chronic disease management. There is little empirical evidence and ambiguous theoretical guidance on which effects to expect on the quality of care. This paper evaluates the impact of the payment incentives on quality of care in diabetes, as measured by the probability of ordering an HbA1c test. The empirical analysis is conducted with a unique data set and a multivariate probit model to control for the simultaneous self-selection process of practices into the payment scheme and larger practices. The study finds that the incentive reform had a positive effect on quality of care in diabetes management and that participation in the scheme is facilitated by the support of Divisions of General Practice.
    Date: 2008–07
  11. By: Cutler, David (Harvard U); Fung, Winnie; Kremer, Michael; Singhal, Monica
    Abstract: We examine the effects of malaria on educational attainment by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. Malaria eradication resulted in gains in literacy and primary school completion rates of approximately 12 percentage points. These estimates imply that the eradication of malaria can explain about half of the gains in these measures of educational attainment between the pre- and post-eradication periods in areas where malaria was prevalent. The effects are not present in urban areas, where malaria was not considered to be a problem in the pre-eradication period. The results cannot be explained by convergence across areas. We find gains for both men and women as well as for members of scheduled castes and tribes, a traditionally disadvantaged group.
    JEL: H51
    Date: 2007–10
  12. By: Finkelstein, Amy (Massachusetts Institute of Technology); Luttmer, Erzo F. P. (Harvard U); Notowidigdo, Matthew J. (Massachusetts Institute of Technology)
    Abstract: We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study’s panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. We find robust evidence that the marginal utility of consumption declines as health deteriorates. Our central estimate is that a one-standard¬deviation increase in the number of chronic diseases is associated with an 11 percent decline in the marginal utility of consumption relative to this marginal utility when the individual has no chronic diseases. The 95 percent confidence interval allows us to reject declines in marginal utility of less than 2 percent or more than 17 percent. Point estimates from a wide range of alternative specifications tend to lie within this confidence interval. We present some simple, illustrative calibration results that suggest that state dependence of the magnitude we estimate can have a substantial effect on important economic problems such as the optimal level of health insurance benefits and the optimal level of life-cycle savings.
    JEL: D12
    Date: 2008–06
  13. By: Cutler, David (Harvard U); Glaeser, Edward L.
    Abstract: re individuals more likely to smoke when they are surrounded by smokers? In this paper, we examine the evidence for peer effects in smoking. We address the endogeneity of peers by looking at the impact of workplace smoking bans on spousal and peer group smoking. Using these bans as an instrument, we find that individuals whose spouses smoke are 40 percent more likely to smoke themselves. We also find evidence for the existence of a social multiplier in that the impact of smoking bans and individual income becomes stronger at higher levels of aggregation. This social multiplier could explain the large time series drop in smoking among some demographic groups.
    Date: 2008–03
  14. By: Scherer, F. M. (Harvard U)
    Abstract: This paper, written for a conference on biomedical innovation at the University of Kiel, examines the theory of induced innovation, with science-push and demand-pull variants, in the context of pharmaceutical R&D. It explores how the theory applies under varying market structure, uncertainty, and behavioral (i.e., rent-seeking vs. secure profit maximization) conditions. The paradox of high gross margins but only mildly supra-normal returns on investment in the pharmaceutical industry is consistent with the pursuit of parallel research paths under uncertainty, rent-seeking, and cannibalization hypotheses. Parallel paths strategies carried implicitly to near-zero profit equilibria by firms competing for monopoly positions may approach social optimality, given plausible differences between private and social returns. But evidence on whether this outcome is actually approximated remains scarce.
    Date: 2007–09
  15. By: Hans Oluf Hansen (Department of Economics, University of Copenhagen)
    Abstract: Is variation in empirical mortality across populations consistent with a hypothesis of selec-tion? To examine this proposition an extended frailty mortality model is put forward; incor-porating biological frailty; a common non-parametric hazard, joint for men and women, rep-resenting endogenous mortality in terms of degenerative aging (senescence); and environ-mental influence on survivorship. As the model is fitted to empirical cohort mortality exhibit-ing extreme variation, biological aging is identified up to a multiplicative factor. Mortality of elected cohorts born in Sweden, Denmark, and Iceland during the past 250 years and in Japan any ten years between 1950 and 1990 is approached appropriately by the model. Reduced natural selection may account for a substantial part of the empirical mortality change in the course of the demographic transition. Survivorship in the late nineteenth and the twentieth century ties selection to major medical advances and rapid recent mortality decline, probably with consequences for future health and survivorship.
    Keywords: biodemography; congenital frailty; selection; heterogeneity; cohort mortality; stochastic micro-simulation; longevity
    JEL: C6 C8 I12 J1
    Date: 2008–08
  16. By: Sambit Bhattacharyya
    Abstract: The sharp division between the 'institutions view' and the 'disease view' has been one of the distinctive features of the 'root causes of economic progress' literature. Based on evidence from cross-national data, the 'institutions school' claims that institutions are the only root cause of development, whereas the 'disease school' claims that diseases are also equally important. In this paper, I contribute to this literature by proposing a unified structure to marry the two conflicting views. I argue that overcoming diseases are of prime importance at an early stage of economic development, whereas institutions are more important at a later stage. I find support for this hypothesis in the development history literature on Africa, India, China and the Americas.
    Keywords: Root Causes; Institutions; Diseases; Economic Development
    Date: 2008
  17. By: Alejandro Cid (Universidad de Montevideo); Daniel Ferres (Universidad de Montevideo); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: The happiness literature provides evidence on various factors, other than money, that do seem to contribute to individual happiness. As one explores the produced “happiness economics” literature, it is direct to understand the difficulty to find proper information on developing countries reality. In our analysis we investigate the relationship between income, family composition, health and religion over subjective well-being in the Southern Cone (Argentina, Chile and Uruguay). Specifically, we analyze data from the SABE survey a study conducted among people who are 60 years old or over, in various Latin American countries. Main obtained results show a positive correlation between higher levels of income and health,being married and the frequent religion practice and higher levels of subjective well-being. On the contrary, malnutrition has a negative impact on happiness indicators. In order to add robustness to our results and to deal with endogeneity issues, this paper uses different indicators of well-being, alternative estimation models such as a semiparametric one and a propensity score approach for the treatment of marriage.
    Keywords: well-being, happiness, elderly, health, family; Latin America
    JEL: I31 I10 J14 J12
    Date: 2008–07
  18. By: Alan M. Garber; Jonathan Skinner
    Abstract: The U.S. health system has been described as the most competitive, heterogeneous, inefficient, fragmented, and advanced system of care in the world. In this paper, we consider two questions: First, is the U.S. health care system productively efficient relative to other wealthy countries, in the sense of producing better health for a given bundle of hospital beds, physicians, nurses, and other factor inputs? Second, is the U.S. allocatively efficient relative to other countries, in the sense of providing highly valued care to consumers? For both questions, the answer is most likely no. Although no country can claim to have eliminated inefficiency, the U.S. has fragmented care, high administrative costs, and stands out with regard to heterogeneity in treatment because of race, income, and geography. The U.S. health care system is also more likely to pay for diagnostic tests, treatments, and other forms of care before effectiveness is established and with little consideration of the value they provide. A number of proposed reforms that are designed to ameliorate shortcomings of the U.S. health care system, such as quality improvement initiatives and coverage expansions, are unlikely by themselves to reduce expenditures. Addressing allocative inefficiency is a far more difficult task but central to controlling costs.
    JEL: I1 I10 I11 I12
    Date: 2008–08
  19. By: Yu-Chu Shen; Karen Eggleston
    Abstract: Given an increasingly complex web of financial pressures on providers, studies have examined how the hospitals' overall financial health affect different aspects of hospital operation. In our study, we analyze this issue focusing on hospital access and quality by introducing an important aspect of the financial incentives, soft budget constraints (SBC), that takes into account both hospital's current and past financial health as well as their expected financial outlook (i.e., whether there is a sponsoring organization to bail them out). We develop a conceptual framework of SBC by considering the resultant incentives on cost control and quality improvement innovations; and examine the effect of SBC on the following aspects of access and quality: safety net service survival and AMI mortality rates. We find that hospitals with softer budget constraints are less likely to shut down safety net services. In addition, hospitals with softer budget constraints appear to have better mortality outcomes, suggesting that the reduced incentive to engage in cost control innovation as the result of SBC outweighs the dampening effect of quality improvement innovation.
    JEL: I11 I18
    Date: 2008–08

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