nep-hea New Economics Papers
on Health Economics
Issue of 2009‒09‒26
eighteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. The Effect of Lone Motherhood on the Smoking Behaviour of Young Adults By Marco Francesconi; Stephen P. Jenkins; Thomas Siedler
  2. Understanding, Modeling and Managing Longevity Risk: Key Issues and Main Challenges By Pauline Barrieu; Harry Bensusan; Nicole El Karoui; Caroline Hillairet; Stéphane Loisel; Claudia Ravanelli; Yahia Salhi
  3. Impact of Non-Smoking Ordinances on Hospitality Revenues: The Case of Germany By Gabriel Ahlfeldt; Wolfgang Maennig
  4. Long-term Care Insurance Facilities and Interregional Migration of the Elderly in Japan By Akihiro Kawase; Katsuyoshi Nakazawa
  5. Health Inequality over the Life-Cycle By Timothy J. Halliday
  6. Health Status and the Allocation of Time By Melinda Podor; Timothy J. Halliday
  7. Selection Stories: Understanding Movement across Health Plans By Cutler, David; Lincoln, Bryan; Zeckhauser, Richard
  8. Approaches to Estimating the Health State Dependence of the Utility Function By Finkelstein, Amy N.; Luttmer, Erzo F. P.; Notowidigdo, Matthew J.
  9. Estimating Health Benefits When Behaviours are Endogenous: A Case of Indoor Pollution in Rural Nepal By Krishna Prasad Pant
  10. Are Health Problems Systemic? Politics of Access and Choice under Beveridge and Bismarck Systems By Zeynep Or; Chantal Cases; Melanie Lisac; Karsten Vrangbaek; Ulrika Winblad; Gwyn Bevan
  11. Mortality-Indexed Annuities By Richter, Andreas; Weber, Frederik
  12. Health Insurance Tax Credits and Health Insurance Coverage of Low-Earning Single Mothers By Merve Cebi; Stephen A. Woodbury
  13. Infant mortality, income and adult stature in Spain By Mariano Bosch; Carlos Bozzoli; Climent Quintana
  14. Inheritances, Health and Death By Beomsoo Kim; Christopher J. Ruhm
  15. The Welfare Effects of Medical Malpractice Liability By Darius N. Lakdawalla; Seth A. Seabury
  16. The Role of Child Health and Economic Status in Educational, Health and Labour Market Outcomes in Young Adulthood By Paul Contoyannis; Martin Dooley
  17. International Differences in Longevity and Health and their Economic Consequences By P.-C. Michaud; D. Goldman; D. Lakdawalla; A. Gailey; Y. Zheng
  18. Understanding the Economic Consequences of Shifting Trends in Population Health By P.-C. Michaud; D. Goldman; D. Lakdawalla; Y. Zheng; A. Gailey

  1. By: Marco Francesconi; Stephen P. Jenkins; Thomas Siedler
    Abstract: We provide evidence that living with an unmarried mother during childhood raises smoking propensities for young adults in Germany.
    Keywords: smoking; lone parent; childhood family structure; divorce; unobserved heterogeneity
    JEL: I10 J12 J18
    Date: 2009
  2. By: Pauline Barrieu (Department of Statistics - London School of Economics); Harry Bensusan (CMAP - Centre de Mathématiques Appliquées - CNRS : UMR7641 - Polytechnique - X); Nicole El Karoui (CMAP - Centre de Mathématiques Appliquées - CNRS : UMR7641 - Polytechnique - X); Caroline Hillairet (CMAP - Centre de Mathématiques Appliquées - CNRS : UMR7641 - Polytechnique - X); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Claudia Ravanelli (Swiss Financial Institute - École Polytechnique Fédérale de Lausanne); Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429, CERDALM - SCOR Global Life)
    Abstract: In this article we investigate the latest developments on longevity risk modeling. We first introduce longevity risk and some key actuarial definitions as to allow for a better understanding of the related challenges in term of risk management from both a financial and insurance point of view. The article also provides a global view on the practical issues on longevity-linked insurance and pension funds products that arise mainly from the steady increase in life expectancy since 1960s. Those issues are leading the industry to adopt more effective regulations to better assess and efficiently manage the inherited risks. Simultaneously, the development on the longevity has enhanced the need of capital markets as to manage and transfer the risk throughout the so-called insurance-linked securities (ILS). Therefore, we also highlight future developments on longevity risk management from a financial point of view, bringing up practices from the banking industry in terms of modeling and pricing.
    Keywords: Longevity Risk; securitization; risk transfer; incomplete market; life insurance; stochastic mortality; pensions; long term interest rate; regulation; population dynamics.
    Date: 2009–09
  3. By: Gabriel Ahlfeldt (Chair for Economic Policy, University of Hamburg); Wolfgang Maennig (Chair for Economic Policy, University of Hamburg)
    Abstract: Non-smoking ordinances are among the most popular albeit controversial public health-care legislations worldwide. This article provides an empirical assessment of the impact of non-smoking ordinances on bar and restaurant revenues in German Federal States. By application of panel spline regression and difference-in-difference strategies, we find negative impact limited to bars in the very short run. If any, there is a positive impact on total expenditures in the long run, indicating that either consumption pattern has not changed at all or that any reduction in spending by smokers is compensated for by a corresponding increase by non-smokers. These findings support the German – and similar – non-smoking legislations in the sense that positive externalities resulting from reduced health care cost are likely to outweigh the risk to businesses in the hospitality sector, at least in the long run.
    Keywords: Keywords: Bar Revenues, Non-smoking Ordinances, Restaurant Revenues
    JEL: I18 K32
    Date: 2009
  4. By: Akihiro Kawase (Faculty of Economics, Toyo University, 5-28-20 Hakusan, Bunkyo-ku, Tokyo 112-8606, Japan); Katsuyoshi Nakazawa (Faculty of Economics, Toyo University)
    Abstract: Using municipality-level data of Japan, this paper empirically examines how the capacity of long-term care insurance facilities impacts interregional migration of the elderly. We construct net-migration data of the elderly population in each municipality by combining statistics available from existing sources. We find that interregional differences in capacity of long-term care insurance facilities generate strong magnetic effects on migration of the elderly. Our results indicate that family care is difficult and that long-term care insurance facilities are necessary for late-stage elderly in need of long-term care.
    Keywords: Long-term care insurance facility, Interregional migration, Welfare magnet
    JEL: H75
    Date: 2009
  5. By: Timothy J. Halliday (Department of Economics, University of Hawaii at Manoa; Institute for the Study of Labor (IZA))
    Abstract: We investigate the evolution of health inequality over the life-course. Health is modeled as a latent variable that is determined by three factors: endowments, and permanent and transitory shocks. We employ Simulated Minimum Distance and the Panel Study of Income Dynamics to estimate the model. We estimate that permanent shocks account for under 10% of the total variation in health for the colleged educated, but between 35% and 70% of total health variability for people without college degrees. Consistent with this, we find that health inequality moves substantially more slowly over the life-course for the college educated.
    Keywords: health, dynamic panel data models, variance decomposition
    JEL: I1 C5
    Date: 2009–08–10
  6. By: Melinda Podor (Department of Economics, University of Hawaii at Manoa); Timothy J. Halliday (Department of Economics, University of Hawaii at Manoa; Institute for the Study of Labor (IZA))
    Abstract: In this paper, we quantify the effects of health on time allocation. We estimate that improvements in health status have large and positive effects on time allocated to home and market production and large negative effects on time spent watching TV, sleeping, and consuming other types of leisure. We find that poor health status results in about 300 additional hours allocated to unproductive activities per year. Plausible estimates of the cost of this lost time exceed $10,000. We also find that, for men, better health induces a substitution of market-produced goods for home-produced goods. Particularly, each additional minute spent in home production saves $0.37.
    Keywords: Labor Supply, Time Allocation, Health
    JEL: I1 J2
    Date: 2009–08–05
  7. By: Cutler, David (Harvard University); Lincoln, Bryan (Office of the Attorney General, Commonwealth of Massachusetts); Zeckhauser, Richard (Harvard University)
    Abstract: This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.
    Date: 2009–07
  8. By: Finkelstein, Amy N. (MIT); Luttmer, Erzo F. P. (Harvard University and IZA, Bonn); Notowidigdo, Matthew J. (MIT)
    Abstract: If the marginal utility of consumption depends on health status, this will affect the economic analysis of a number of central problems in public finance, including the optimal structure of health insurance and optimal life cycle savings. In this paper, we describe the promises and challenges of various approaches to estimating the effect of health on the marginal utility of consumption. Our basic conclusion is that while none of these approaches is a panacea, many offer the potential to shed important insights on the nature of health state dependence.
    JEL: D12 I10
    Date: 2009–01
  9. By: Krishna Prasad Pant
    Abstract: The effects of indoor air pollution on respiratory health after adjusting for endogenous health behaviours are estimated. The study includes measurements on indoor air pollution and is based on detailed survey 600 households from Syangja and Chitwan districts of Nepal. Instrumental variable probit regressions to find the effects of pollution-reducing interventions on chronic bronchitis, asthma and acute respiratory infections are used. [SANDEE].
    Keywords: endogenous, Indoor air pollution, Biogas, Chronic bronchitis, Asthma, Acute respiratory infections, Instrumental variable probit, regressions, health behaviours, Nepal, asthma, respiratory infections
    Date: 2009
  10. By: Zeynep Or (IRDES institut for research and information in health economics); Chantal Cases (IRDES institut for research and information in health economics); Melanie Lisac (Bertelsmann Stiftung); Karsten Vrangbaek (University of Copenhagen); Ulrika Winblad (Department of Public Health and Caring Sciences Uppsala Univeristy); Gwyn Bevan (London School of Economics)
    Abstract: Industrialised countries face similar challenges for improving the performance of their health system. Nevertheless the nature and intensity of the reforms required are largely determined by each country's basic social security model. This paper looks at the main differences in performance of five countries and reviews their recent reform experience, focusing on three questions: Are there systematic differences in performance of Beveridge and Bismarck-type systems? What are the key parameters of health care system which underlie these differences? Have recent reforms been effective? Our results do not suggest that one system-type performs consistently better than the other. In part, this may be explained by the heterogeneity in organisational design and governance both within and across these systems. Insufficient attention to those structural differences may explain the limited success of a number of recent reforms.
    Keywords: Health system, Beveridge, Bismarck, reforms, performance
    JEL: I18 O57
    Date: 2009–09
  11. By: Richter, Andreas; Weber, Frederik
    Abstract: Longevity risk has become a major challenge for governments, individuals, and annuity providers in most countries, and especially its aggregate form, i.e. the risk of unsystematic changes to general mortality patterns, bears a large potential for accumulative losses for insurers. As obvious risk management tools such as (re)insurance or hedging are less suited to manage an annuity provider’s exposure to aggregate longevity risk, the current paper proposes a new type of life annuities with benefits contingent on actual mortality experience, and it also details actuarial aspects of implementation. Similar adaptations to conventional product design exist in investment-linked annuities, and a role model for long-term contracts contingent on actual cost experience is found in German private health insurance so that the idea is not novel in general, but it is in the context of longevity risk. By not or re-transferring the systematic longevity risk insurers may avoid accumulative losses so that the primary focus in an extensive Monte-Carlo simulation is on the question of whether and to what extent such products are also advantageous for policyholders in contrast to a comparable conventional annuity product.
    Keywords: Longevity risk; systematic risk; risk avoidance; mortality-indexed annuities
    JEL: G22 G23 C15
    Date: 2009–09
  12. By: Merve Cebi (University of Massachusetts Dartmouth); Stephen A. Woodbury (W.E. Upjohn Institute and Michigan State University)
    Abstract: The Omnibus Budget Reconciliation Act of 1990 introduced a refundable tax credit for low-income working families who purchased health insurance coverage for their children. This health insurance tax credit (HITC) existed during tax years 1991, 1992, and 1993, and was then rescinded. We use Current Population Survey data and a difference-in-differences approach to estimate the HITC’s effect on private health insurance coverage of low-earning single mothers. The findings suggest that during 1991–1993, the health insurance coverage of single mothers was about 6 percentage points higher than it would have been in the absence of the HITC.
    Keywords: Retirement; Health insurance; Low-wage workers; Tax credits and subsidies
    JEL: H2 H51 I18 J32
    Date: 2009–06
  13. By: Mariano Bosch; Carlos Bozzoli; Climent Quintana
    Abstract: This paper presents new evidence on the relationship between infant mortality at the year of birth and adult stature using regional data for five cohorts in Spain, born between 1969 and 1986, a period of significant economic and social transformation. Consistent with previous studies, we find that there is a strong negative correlation between infant mortality and adult height, even after controlling for: secular changes affecting both infant mortality and adult height, constant differences across regions, and economic conditions at birth. Interestingly, we do not find a role for either GDP per capita or income inequality in the year of birth in explaining average cohort height after accounting for infant mortality in the year of birth. Disease, not income, appears to have been the constraining factor in Spain, at least after 1969. The burden of disease in childhood can have long-lasting effects on health, reflected in differences in adult stature. Our results resonate on recent empirical findings for developed and developing countries, and suggest that the epidemiological transition in the 20 years leading to Spain’s entry into European Union led to subsequent improvements in adult height.
    Date: 2009–09
  14. By: Beomsoo Kim; Christopher J. Ruhm
    Abstract: We examine how wealth shocks, in the form of inheritances, affect the mortality rates, health status and health behaviors of older adults, using data from eight waves of the Health and Retirement Survey (HRS). Our main finding is that bequests do not have substantial effects on health, although some improvements in quality-of-life are possible. This absence occurs despite increases in out-of-pocket (OOP) spending on health care and in the utilization of medical services, especially discretionary and non-lifesaving types such as dental care. Nor can we find a convincing indication of changes in lifestyles that offset the benefits of increased medical care. Inheritances are associated with higher alcohol consumption, but with no change in smoking or exercise and a possible decrease in obesity.
    JEL: I12
    Date: 2009–09
  15. By: Darius N. Lakdawalla; Seth A. Seabury
    Abstract: Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms—growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.
    JEL: I1
    Date: 2009–09
  16. By: Paul Contoyannis; Martin Dooley
    Abstract: The Ontario Child Health Study provides the first opportunity in Canada to assess directly the relationship between socio-economic and health status in childhood and levels of completed schooling, health status and labour market success in young adulthood. We find that childhood health problems are negatively associated with educational attainment, especially the probability of a university degree, and the health status of young adults. Our results also imply that childhood health problems influence adult labour force outcomes, especially for males, mainly through adult levels of schooling and health.
    Keywords: Child Health; Adult Outcomes
    JEL: I10
    Date: 2009–09
  17. By: P.-C. Michaud; D. Goldman; D. Lakdawalla; A. Gailey; Y. Zheng
    Abstract: In 1975, 50 year-old Americans could expect to live slightly longer than their European counterparts. By 2005, American life expectancy at that age has diverged substantially compared to Europe. We find that this growing longevity gap is primarily the symptom of real declines in the health of near-elderly Americans, relative to their European peers. In particular, we use a microsimulation approach to project what US longevity would look like, if US health trends approximated those in Europe. We find that differences in health can explain most of the growing gap in remaining life expectancy. In addition, we quantify the public finance consequences of this deterioration in health. The model predicts that gradually moving American cohorts to the health status enjoyed by Europeans could save up to $1.1 trillion in discounted total health expenditures from 2004 to 2050.
    Keywords: disability, mortality, international comparisons, microsimulation
    JEL: I10 I38 J26
    Date: 2009–09
  18. By: P.-C. Michaud; D. Goldman; D. Lakdawalla; Y. Zheng; A. Gailey
    Abstract: The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy – with a concomitant decrease in the public-sector’s annuity burden – but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.
    Keywords: disability, health care costs, social security, microsimulation
    JEL: I10 I38 J26
    Date: 2009–09

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