nep-hea New Economics Papers
on Health Economics
Issue of 2010‒01‒10
eighteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Public Health in Europe: The 2007-2009 Financial Crisis and UNECE Activities By Robert Shelburne; Claudia Trentini
  2. A Natural Experiment on Sick Pay Cuts, Sickness Absence, and Labor Costs By Nicolas R. Ziebarth; Martin Karlsson
  3. The Effects of Expanding the Generosity of the Statutory Sickness Insurance System By Nicolas R. Ziebarth; Martin Karlsson
  4. Losses of expected lifetime in the US and other developed countries: methods and empirical analyses By Vladimir M. Shkolnikov; Evgueni M. Andreev; Zhen Zhang; James Oeppen; James W. Vaupel
  5. Catastrophic Health Expenditure and Household Well-Being By Abul Naga, Ramses; Lamiraud, K
  6. On The Rise of Health Spending and Longevity By Fonseca, Raquel; Michaud, Pierre-Carl; Galama, Titus; Kapteyn, Arie
  7. New Evidence on the Role of Remittances on Health Care Expenditures by Mexican Households By Amuedo-Dorantes, Catalina; Pozo, Susan
  8. The Impact of the National School Lunch Program on Child Health: A Nonparametric Bounds Analysis By Gundersen, Craig; Kreider, Brent; Pepper, John V.
  9. Why is there such a gap between health expenditures and outcomes in Norway compared to Finland? By Melberg, Hans Olav
  10. Life Cycle Wages of Doctors - An Empirical Analysis of the Earnings of Norwegian Physicians By Fjeldvig, Knut
  11. Why Are Health Care Report Cards So Bad (Good)? By Yijuan Chen
  12. Health and the savings of insured versus uninsured, working-age households in the U.S. By Maude Toussaint-Comeau; Jonathan Hartley
  13. The Effects of a Sick Pay Reform on Absence and on Health-Related Outcomes By Patrick Puhani; Katja Sonderhof
  14. Grain prices and mortality in Vienna, 1648-1754 By Julia Casutt; Ulrich Woitek
  15. Theoretical and Empirical Analysis of Mixed Medical Care Services in Japan ~ What is Equity? ~ By Hiromi Saito; Wataru Suzuki
  16. Work Disability, Work, and Justification Bias in Europe and the U.S. By Arie Kapteyn; James P. Smith; Arthur van Soest
  17. Grossman’s Health Threshold and Retirement By Titus J. Galama; Arie Kapteyn; Raquel Fonseca; Pierre-Carl Michaud
  18. Grossman’s Missing Health Threshold By Titus J. Galama; Arie Kapteyn

  1. By: Robert Shelburne (United Nations Economic Commission for Europe); Claudia Trentini (United Nations Economic Commission for Europe)
    Abstract: The economic and financial crisis of 2007-2009 had a serious impact on the larger European region. For western Europe this was the deepest economic downturn since the Second World War. Given the well-developed safety nets for this region the immediate impact on health is likely to be minor. However the crisis will negatively affect the long-run level of per capita income and has left government fiscal positions’ in a poor state; both of these developments will likely have some minor impact on health outcomes for years to come. The deterioration of government finances also raises a concern that the region’s contribution to global public health through its assistance programs may be negatively impacted. In the coming years, pollution control, including of green house gas emissions, is a major challenge for the region. Providing health care for an aging population is also a fundamental challenge for economies with problematic public finances. Eastern Europe and the European CIS were the most severely affected regions of the world. Despite the large economic downturns in these economies, this crisis was still not as great as that that occurred during the 1990s with their transition from planned economies to market economies. Although significant progress has been made in establishing social safety nets and public health programs in these countries over the last decade, these remain inadequate and as a result this economic crisis is likely to have a noticeable negative impact on public health throughout eastern Europe and the CIS. Even before the current economic downturn, there were a number of significant health concerns for eastern Europe and the CIS that were continuing to deteriorate which could have been significantly improved with realistic levels of public expenditures and the implementation of proper policies. The health care systems (often enterprise-based) and institutions collapsed during the transition due to the breakup of the economic and political systems and even the countries themselves (i.e., the Soviet Union and Yugoslavia). The poor health outcomes for the region are due to the fact that a number of diseases and social behaviors became established during the turmoil of the 1990s transition and did not recede as prosperity retuned after 2000. The increase in inequality that developed during the transition is reflected in growing inequalities for access to health care and in health care outcomes. Today, the region is characterized (relative to other regions with similar levels of income) by its high death rates from noncommunicable diseases. The issues of alcoholism and traffic fatalities are highlighted in this paper. For communicable diseases, the European CIS are central in the global fight against TB and HIV/AIDS.
    Keywords: health systems, economic crisis, transition economies, CIS, Russia, HIV, AIDS, Tuberculosis, road safety, pollution
    JEL: I10 I12 I18 P20 P27 P29
    Date: 2009–11
  2. By: Nicolas R. Ziebarth; Martin Karlsson
    Abstract: This study estimates the reform effects of a reduction in statutory sick pay levels on various outcome dimensions. A federal law reduced the legal obligation of German employers to provide 100 percent continued wages for up to six weeks per sickness episode to 80 percent. This measure increased the ratio of employees having no days of absence by about 7.5 percent. The mean number of absence days per year decreased by about 5 percent. The reform might have reduced total labor costs by about €1.5 billion per year which might have led to the creation of around 50,000 new jobs.
    JEL: H51 I18 J22
    Date: 2009
  3. By: Nicolas R. Ziebarth; Martin Karlsson
    Abstract: In 1999, in Germany, the statutory sick pay level was increased from 80 to 100 percent of foregone earnings for sickness episodes of up to six weeks. We show that this reform has led to an increase in average absence days of about 10 percent or one additional day per employee, per year. The estimates are based on SOEP survey data and parametric, nonparametric, and combined matching-regression difference-in-differences methods. Extended calculations suggest that the reform might have increased labor costs by about €1.8 billion per year and might have led to the loss of around 50,000 jobs.
    Keywords: Sickness absence, statutory sick pay, natural experiment, Socio-Economic Panel Study (SOEP)
    JEL: H51 I18 J22
    Date: 2009
  4. By: Vladimir M. Shkolnikov (Max Planck Institute for Demographic Research, Rostock, Germany); Evgueni M. Andreev (Max Planck Institute for Demographic Research, Rostock, Germany); Zhen Zhang (Max Planck Institute for Demographic Research, Rostock, Germany); James Oeppen (Max Planck Institute for Demographic Research, Rostock, Germany); James W. Vaupel (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Patterns of diversity in age at death are examined using e†, a dispersion measure that also equals the average expected lifetime lost at death. We apply two methods for decomposing differences in e†. The first method estimates the contributions of average levels of mortality and mortality age structures. The second (and newly developed) method returns components produced by differences between age- and cause-specific mortality rates. The US is close to England and Wales in mean life expectancy, but has higher life expectancy losses and lacks mortality compression. The difference is determined by mortality age structures whereas the role of mortality levels is minor. The difference is related to excess mortality at ages under 65 from various causes in the US. Regression on 17 country-series suggests that e† correlates with income inequality across countries but not across time. This result can be attributed to dissimilarity between the age- and cause-of-death structures of temporal mortality reduction and inter-country mortality variation. It also suggests that factors affecting overall mortality decrease differ from those responsible for excess lifetime losses in the US in particular. The latter can be related to weaknesses of health system and other factors resulting in premature death including heart diseases, amenable causes, accidents and violence.
    Keywords: United States
    JEL: J1 Z0
    Date: 2009–12
  5. By: Abul Naga, Ramses; Lamiraud, K
    Abstract: According to the catastrophic health expenditure methodology a house- hold is in catastrophe if its health out-of-pocket budget share exceeds a critical threshold. We develop a conceptual framework for addressing three questions in relation to this methodology, namely: 1. Can a budget share be informative about the sign of a change in welfare? 2. Is there a positive association between a households poverty shortfall and its health out-of- pocket budget share? 3. Does an increase in population coverage of a health insurance scheme always result in a reduction of the prevalence of catastrophic expenditures?
    Keywords: Catastrophic health expenditure; welfare change; poverty; performance of health insurance schemes
    Date: 2009
  6. By: Fonseca, Raquel (RAND); Michaud, Pierre-Carl (RAND); Galama, Titus (RAND); Kapteyn, Arie (RAND)
    Abstract: We use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. We estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a "synergy" or interaction effect which helps explain an additional 37% increase in health spending. We estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10%.
    Keywords: demand for health, health spending, insurance, technological change, longevity
    JEL: I10 I38 J26
    Date: 2009–12
  7. By: Amuedo-Dorantes, Catalina (San Diego State University, California); Pozo, Susan (Western Michigan University)
    Abstract: Using Mexico's 2002 wave of the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH), we find that international remittances raise health care expenditures. Approximately 6 pesos of every 100 peso increment in remittance income are spent on health. The sensitivity of health care expenditures to variations in the level of international remittances is almost three times greater than its responsiveness to changes in other sources of household income. Furthermore, health care expenditures are less responsive to remittance income among lower-income households. Since the lower responsiveness may be partially due to participation of lower-income households in public programs like PROGRESA (now called Oportunidades), we also analyze the impact of remittances by health care coverage. As expected, we find that households with some kind of health care coverage – either through their jobs or via participation in PROGRESA – spend less of remittance income increments on health care than households lacking any health care coverage. Hence, remittances may help equalize health care expenditures across households with and without health care coverage.
    Keywords: remittances, health care, household expenditures, Mexico
    JEL: F24 I1
    Date: 2009–12
  8. By: Gundersen, Craig; Kreider, Brent; Pepper, John V.
    Abstract: Children in households reporting the receipt of free or reduced price school meals through the National School Lunch Program (NSLP) are more likely to have negative health outcomes than eligible nonparticipants. Assessing the causal effects of the program is made difficult, however, by the presence of endogenous selection into the program and systematic misreporting of participation status. Using data from the National Health and Nutrition Examination Survey (NHANES), we extend and apply partial identification methods to account for these two identification problems in a single unifying framework. Similar to a regression discontinuity design, we introduce a new way to conceptualize the monotone instrumental variable (MIV) assumption using eligibility criteria as monotone instruments. Under relatively weak assumptions, we find evidence that receipt of free and reduced price lunches through the NSLP improves the health outcomes of children.
    Keywords: partial identification, selection problem, classification error, monotone instrumental variable, regression discontinuity, National School Lunch Program, food insecurity, obesity
    JEL: C1 C2 I3
    Date: 2009–12–15
  9. By: Melberg, Hans Olav (Institute of Health Management and Health Economics)
    Abstract: According to the OECD Norway spends 47% more on health care per capita compared to Finland and about 30% more than the other Nordic countries. At the same time indicators of health status show that Norway is not better on important indicators of health. This raises the question of why there is such a gap between spending and outcome in Norway compared to the other Nordic countries. This paper lists a number of possible explanations and quantifies their importance. The conclusion is that higher wages may explain up to 38% of the difference between Norway and Finland and differences in staff levels explain about 25%. Data errors are difficult to quantify, but the data on in long term care suggests that it accounts for at least 20% of the difference. Diminishing or zero marginal return is a controversial explanation for the lack of difference in outcomes despite higher spending and a brief review of the literature shows conflicting evidence. Finally, the last section argue that a convincing explanation of the growth of health spending should be based on a model that takes into account the fact that health care to a large extent is provided outside the free-market and that people seems to have special moral intuitions when it comes to the provision of health services as opposed to many other goods. <p>
    Keywords: Health expandures; OECD; wages; Norway
    JEL: H51 I10 I12
    Date: 2009–12–14
  10. By: Fjeldvig, Knut (Department of Economics, University of Oslo)
    Abstract: We use individual panel data to estimate ageearnings profiles for Norwegian physicians. Based on data covering the 19932006 period we find that the ageearning profiles of physicians share many of the attributes of the classical Mincer function. Physician`s earnings rise, but a decreasing rate, for the first 20 years after medical training; they peak between the ages of 55 and 59; and they decline slightly toward the end of the career. We observe that there will be complications when using the regular crosssectional methods because of cohort and period effects on income. Using fixedeffects method therefore provides a more accurate picture of the profiles. When looking at profiles by gender we find that there are large differences between the earnings of male and female physicians, some of which can be attributed to reduced labor supply during childrearing years and some to lower investments in specialization among female doctors. We also discover differences in the profiles of physicians educated in Norway and abroad and discuss alternative explanations for this pattern. <p>
    Keywords: Physicians; age-earnings; income; mincer function; gender; empirical analysis; Norway
    JEL: J31 J44
    Date: 2009–12–14
  11. By: Yijuan Chen
    Abstract: This paper provides a signaling-game theoretical foundation for empirically testing the effects of quality report cards in the U.S. health care industry. It shows that, when health care providers face an identical distribution of patient illness severities, a trade-off between multidimensional measures in the existing report cards renders them a mechanism that reveals the providers' qualities without causing them to select patients. However, non-identical patient type distributions between providers, attributed to the referring physician, may force the high-quality provider to shun patients in order to signal himself. Despite this imperfection, the existing report cards cause the minimum provider selection compared with alternative report mechanisms. Since the report cards not only may cause providers to select patients, but also cause patients to select providers, the single difference-in-differences estimates used in previous studies are not su¢ cient to indicate providers' selection behavior, and cannot capture the report cards' long-run welfare effect with short-run data. In an updated empirical framework, a treatment effect will be estimated once every period.
    JEL: I18 D82 C31
    Date: 2009–12
  12. By: Maude Toussaint-Comeau; Jonathan Hartley
    Abstract: This paper examines the effect of a decline in health on the savings and portfolio choice of young, working individuals and the differences between insured and uninsured cohorts using the 2001 Survey of Income and Program Participation. We find that insured individuals are significantly likely to divest from risky asset holdings in response to a decline in health, controlling for variables such as income, age, and out-of-pocket medical expenses. Unlike many previous papers, which dismiss health and portfolio choice associations among retired individuals on the basis of unobserved heterogeneity, we find that our results for working individuals are robust when using fixed effects models in a three-year longitudinal panel. Consistent with an overall theory of risk, we find that the relationship between an onset of poor health and an increased aversion to risky assets among the insured is strongest (only apparent) among married-couple households.
    Date: 2009
  13. By: Patrick Puhani; Katja Sonderhof
    Abstract: We evaluate the effects of a reduction in sick pay from 100 to 80% of the wage. Unlike previous literature, apart from absence from work, we also consider effects on doctor/hospital visits and subjective health indicators. We also add to the literature by estimating both switch-on and switch-off effects, because the reform was repealed two years later. We find a two-day reduction in the number of days of absence. Quantile regression reveals higher point estimates (both in absolute and relative terms) at higher quantiles, meaning that the reform predominantly reduced long durations of absence. In terms of health, the reform reduced the average number of days spent in hospital by almost half a day, but we cannot find robust evidence for negative effects on health outcomes or perceived liquidity constraints.
    Keywords: Sickness pay, absenteeism, health expenditure, hospitalization, difference-indifferences, switch on, switch off, quantile regression, intrinsic motivation
    JEL: I18 J58 J83
    Date: 2009–12
  14. By: Julia Casutt; Ulrich Woitek
    Abstract: Class specific mortality in 17th and 18th Century Vienna shows a cyclical pattern which is related to grain price cycles in the 5-10 years range. This relationship is not stable over time. Applying spectral analysis based on time-varying VARs, it can be shown that at the beginning of the observation period, comovement of grain prices and mortality is considerably high in areas populated by lower classes of society. This comovement cannot be found in richer areas of the city and vanishes over time for the entire population of the city.
    Keywords: Grain prices, mortality, Vienna, spectral analysis
    JEL: N33 N53 N93 C32
    Date: 2009–12
  15. By: Hiromi Saito (National Graduate Institute for Policy Studies); Wataru Suzuki (Gakushuin University)
    Abstract: The aim of this study is to examine the manner in which a Japanese medical regulation affects equity in health care within an economic framework. The regulation is termed “the ban on mixed treatment.” Mixed treatment is the mixed use of treatments covered by public health insurance as well as those not covered by such insurance in the course of treating an illness. In principle, the Japanese Health Ministry bans mixed treatment. In order to examine the effect of mixed treatment on equity in health care, we explain the background of Japanese mixed treatment. Thereafter, we introduce a simple economic model and provide suggestions regarding the behavior of patients under the ban rule. Based on the theoretical model, we simulate the behavior of patients using questionnaire data and analyze the results from various perspectives. Here, we create data using the Contingent Valuation Method (CVM). The results suggest that lifting the ban could reduce differences in treatments among income/asset class but would make payment for health care regressive slightly. The results also suggest that the behavior of patients is different even within the same income/asset class, and there are other factors for receiving uninsured treatment besides capacity to pay.
    Keywords: Mixed treatments, Equity in access to health care, Freedom of choice in health care, Contingent Valuation Method.
    Date: 2009–03
  16. By: Arie Kapteyn (RAND); James P. Smith (RAND); Arthur van Soest (Tilburg University, Netspar & RAND)
    Abstract: To analyze the effect of health on work, many studies use a simple self-assessed health measure based upon a question such as “do you have an impairment or health problem limiting the kind or amount of work you can do?” A possible drawback of such a measure is the possibility that different groups of respondents may use different response scales. This is commonly referred to as “differential item functioning” (DIF). A specific form of DIF is justification bias: to justify the fact that they don’t work, non-working respondents may classify a given health problem as a more serious work limitation than working respondents. In this paper we use anchoring vignettes to identify justification bias and other forms of DIF across countries and socio-economic groups among older workers in the U.S. and Europe. Generally, we find differences in response scales across countries, partly related to social insurance generosity and employment protection. Furthermore, we find significant evidence of justification bias in the U.S. but not in Europe, suggesting differences in social norms concerning work.
    Keywords: Work limiting disability, Vignettes, Reporting bias
    JEL: J28 I12 C81
    Date: 2009–12–16
  17. By: Titus J. Galama (RAND Corporation); Arie Kapteyn (RAND Corporation); Raquel Fonseca (RAND Corporation); Pierre-Carl Michaud (RAND Corporation)
    Abstract: We formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health provided by Grossman. We explicitly assume a functional form of the utility function and carefully account for initial conditions, which allow us to derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. We argue that the Grossman literature has been unnecessarily restrictive in assuming that health is always at Grossman’s “optimal” health level. Exploring the properties of corner solutions we find that advances in population health (health capital) can explain the paradox that while population health and mortality have continued to improve in the developed world, retirement ages have continued to fall with retirees pointing to deteriorating health as an important reason for early retirement. We find that improvements in population health decrease the retirement age, while at the same time individuals retire when their health has deteriorated. In our model, workers with higher human capital (say white collar workers) invest more in health and because they stay healthier retire later than those with lower human capital (say blue collar workers) whose health deteriorates faster. Plausibly, most individuals are endowed with an initial stock of health that is substantially greater than the level required to be economically productive.
    Keywords: health, demand for health, health capital, medical care, labor, retirement
    JEL: I10 I12 J00 J24 J26
    Date: 2009–12–16
  18. By: Titus J. Galama (RAND Corporation); Arie Kapteyn (RAND Corporation)
    Abstract: We present a generalized solution to Grossman’s model of health capital (1972), relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an “optimal” level without adjustment costs. The Grossman model then predicts the existence of a health threshold above which individuals do not demand medical care. Our generalized solution addresses a significant criticism: the model’s prediction that health and medical care are positively related is consistently rejected by the data. We suggest structural and reduced form equations to test our generalized solution and contrast the predictions of the model with the empirical literature.
    Keywords: health, demand for health, health capital, medical care, labor
    JEL: I10 I12 J00 J24
    Date: 2009–12–16

This nep-hea issue is ©2010 by Yong Yin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.