nep-hea New Economics Papers
on Health Economics
Issue of 2017‒11‒05
sixteen papers chosen by
Yong Yin
SUNY at Buffalo

  1. Eary Academic Outcomes of Funded Children with Disability By John Haisken-DeNew; Cain Polidano; Chris Ryan
  2. Does Patient Health Behaviour respond to Doctor’s Effort? By Fichera, Eleonora; Banks, James; Siciliani, Luigi; Sutton, Matt
  3. The causal effect of wrong-hand drive vehicles on road safety By Roesel, Felix
  4. The Healthy Immigrant Paradox and Health Convergence By Amelie F. Constant
  5. Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection By Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  6. The Rising Longevity Gap by Lifetime Earnings: Distributional Implications for the Pension System By Peter Haan; Daniel Kemptner; Holger Lüthen
  7. Forced Migration and Mortality By Thomas K. Bauer; Matthias Giesecke; Laura M. Janisch
  8. Urban Water Disinfection and Mortality Decline in Developing Countries By Sonia R. Bhalotra; Alberto Diaz-Cayeros; Grant Miller; Alfonso Miranda; Atheendar S. Venkataramani
  9. Bismarck's Health Insurance and the Mortality Decline By Stefan Bauernschuster; Anastasia Driva; Erik Hornung
  10. Does Maternal Education Affect Childhood Immunization Rates? Evidence from Turkey By Mustafa Özer; Jan Fidrmuc; Mehmet Ali Eryurt
  11. The Cost of Being Under the Weather: Droughts, Floods, and Health Care Costs in Sri Lanka By Diana De Alwis; Ilan Noy
  12. How Cost-Effective Are New Cancer Drugs in the U.S.? By Frank R. Lichtenberg
  13. "Institutionalization Aversion" and the Willingness to Pay for Home Health Care By Joan Costa-i-Font
  14. Pregnancy Medicaid Expansions and Fertility: Differentiating between the Intensive and Extensive Margins By Lincoln Groves; Sarah Hamersma; Leonard M. Lopoo
  15. A Dose of Managed Care: Controlling Drug Spending in Medicaid By David Dranove; Christopher Ody; Amanda Starc
  16. Political Agency and Public Health Care: Evidence from India By Joan Costa-i-Font; Divya Parmar

  1. By: John Haisken-DeNew (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Cain Polidano (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Chris Ryan (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne)
    Abstract: People with disability face considerable difficulty participating fully in work and the wider community, due in part to poor schooling outcomes. To enable students with disability to meet their potential, the governments provide extra funding to schools to help them meet their special learning needs. Such funding includes extra funding for meeting diverse student needs under formula-based block grant arrangements, funding for specific programs and funding that is targeted at the individual level. In this study, we take a first-step in examining outcomes from targeted funding, over and above outcomes from other funding sources, in mainstream public schools in Victoria under the Program for Student with Disability (PSD). We use information on disability and child development in the first year of school from the Australian Education and Development Census (AEDC), linked to Year 3 NAPLAN and information on PSD receipt from Year 1 to Year 3. We find that only around 17% of mainstream public-school students with disability who are in the bottom quarter of the state developmentally receive ongoing targeted funding under the PSD between 2012 and 2015. Using multivariate regression and rich administrative student data to control for differences between students with disability who do and do not receive targeted funding, we find that the receipt of PSD is strongly associated with being exempt from sitting NAPLAN, which obstructs any proper examination of the educational outcomes from funding. These results raise the prospect of extending existing funding according to developmental need, but caution that any such change should be accompanied with measures that ensure funding outcomes can be assessed.
    Keywords: School funding, disability, standardized test scores
    JEL: I22 I24 I28
    Date: 2017–10
  2. By: Fichera, Eleonora; Banks, James; Siciliani, Luigi; Sutton, Matt
    Abstract: Incentive pay systems have been introduced in public sectors such as education and healthcare. Inthese organisations where the outcome (health or education) is a joint product between different agents,it is unclear what the effects of these incentives are onto the behaviour of untargeted agents. We focuson patient health as a joint product of patient effort, through lifestyle and behaviour, and doctor effort,through diagnosis and treatment. Patient response to doctor effort isa prioriambiguous and dependson the degree of complementarity or substitution between doctor and patient effort. We use data on thephysical activity, drinking and smoking behaviours of over 2,000 patients aged over 50 with cardiovasculardiseases in England. Through a new data linkage and an instrumental variable approach, we test whetherchanges in doctors’ treatment efforts triggered by changes in their payment system between 2004 and2006 had an impact on patient behaviour. Doctors working in primary care practices increased theproportion of patients with controlled disease from 76% to 83% in response to the payment change.Patients responded by reducing the frequency of drinking alcohol and their cigarette consumption. Thissuggests that patient efforts are complements to doctor effort. The results have implications for theeffectiveness of pay-for-performance schemes which encourage higher doctor effort, and the design ofsuch incentive schemes.
    Date: 2017–03–07
  3. By: Roesel, Felix
    Abstract: Left-hand drive (LHD) vehicles share higher road accident risks under left-hand traffic because of blind spot areas. Due to low import prices, the number of wrong-hand drive vehicles skyrockets in emerging countries like Georgia, Kyrgyzstan and Russia. I identify the causal effect of wrong-hand drive vehicles on road safety employing a new \backward version" of the synthetic control method. Sweden switched from left-hand to right-hand traffcin 1967. Before 1967, however, almost all Swedish vehicles were LHD for reasons of international trade and Swedish customer demand. I match on accident figures in the period after 1967, when both Sweden and other European countries drove on the right and used LHD vehicles. Results show that right-hand traffic decreased road fatality, injury and accident risk in Sweden by a proximately 30 percent. An earlier switch would have saved more than 4,000 lives between 1953 and 1966.
    Keywords: road accidents,Sweden,natural experiment,synthetic control method
    JEL: R41 K32 C53
    Date: 2017
  4. By: Amelie F. Constant
    Abstract: The health status of people is a precious commodity and central to economic, socio-political, and environmental dimensions of any country. Yet it is often the missing statistic in all general statistics, demographics, and presentations about the portrait of immigrants and natives. In this paper we are concerned with international migration and health outcomes in the host countries. Through a general literature review and examination of specific immigration countries, we provide insights into the Healthy Immigrant Paradox and the health assimilation of immigrants as we also elucidate selection and measurement challenges. While health is part of human capital, health assimilation is the mirror image of earnings assimilation. Namely, immigrants arrive with better health compared to natives and their health deteriorates with longer residence in the host country, converging to the health of natives or becoming even worse. A deeper understanding of immigrant health trajectories, and disparities with natives and other immigrants is of great value to societies and policymakers, who can design appropriate policy frameworks that address public health challenges, and prevent the health deterioration of immigrants.
    Keywords: health status, healthy immigrant paradox, international migration, assimilation, age-cohort-period effects, selection, aging
    JEL: I00 I10 I12 I14 I18 J00 F22 J11 J14 J15 J24 J61 O15
    Date: 2017
  5. By: Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developped by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insurance while overall 31% report no knowledge of the product. Although we find evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demand side, once respondents have been made aware of the risks, we find that demand remains low, in part because of misperceptions of risk, lack of bequest motive and home ownership which may act as a substitute.
    Keywords: long-term care insurance, adverse selection, stated-preference, health, insurance
    JEL: I11
    Date: 2017
  6. By: Peter Haan; Daniel Kemptner; Holger Lüthen
    Abstract: This study uses German social security records to provide novel evidence about the heterogeneity in life expectancy by lifetime earnings and, additionally, documents the distributional implications of this earnings-related heterogeneity. We find a strong association between lifetime earnings and life expectancy at age 65 and show that the longevity gap is increasing across cohorts. For West German men born 1926-28, the longevity gap between top and bottom decile amounts to about 4 years (about 30%). This gap increases to 7 years (almost 50%) for cohorts 1947-49. We extend our analysis to the household context and show that lifetime earnings are also related to the life expectancy of the spouse. The heterogeneity in life expectancy has sizable and relevant distributional consequences for the pension system: when accounting for heterogeneous life expectancy, we find that the German pension system is regressive despite a strong contributory link. We show that the internal rate of return of the pension system increases with lifetime earnings. Finally, we document an increase of the regressive structure across cohorts, which is consistent with the increasing longevity gap.
    Keywords: mortality, lifetime inequality, pensions, redistribution
    JEL: H55 I14 J11
    Date: 2017
  7. By: Thomas K. Bauer (RWI, Ruhr-University Bochum and IZA); Matthias Giesecke (RWI and IZA); Laura M. Janisch (RWI, RGSEcon and Ruhr-University Bochum)
    Abstract: We examine the long-run effects of forced migration from Eastern Europe into post-war Germany. Existing evidence suggests that displaced individuals are worse off economically, facing a considerably lower income and a higher unemployment risk than comparable natives even twenty years after being expelled. We extend this literature by investigating the relative performance of forced migrants across the entire life cycle. Using social security records that document the exact date of death and a proxy for pre-retirement lifetime earnings, we estimate a signifi cantly and considerably higher mortality risk among forced migrants compared to native West-Germans. The adverse displacement effect persists throughout the earnings distribution except for the top quintile. Although forced migrants are generally worse off regarding mortality outcomes, those with successful labor market histories seem to overcome the long-lasting negative consequences of flight and expulsion.
    Keywords: Forced Migration, Di erential Mortality, Lifetime Earnings, Economic History
    JEL: I12 J61 O15 R23
    Date: 2017–10
  8. By: Sonia R. Bhalotra (University of Essex); Alberto Diaz-Cayeros (Stanford University); Grant Miller (Stanford University; National Bureau of Economic Research (NBER)); Alfonso Miranda (Centro de Investigación y Docencia Económicas (CIDE)); Atheendar S. Venkataramani (University of Pennsylvania)
    Abstract: Historically, improvements in the quality of municipal drinking water made important contributions to mortality decline in wealthy countries. However, water disinfection has not produced equivalent benefits in developing countries today. We investigate this puzzle by analyzing a large-scale municipal water disinfection program in Mexico in 1991 that rapidly increased access to chlorinated water. On average, the program led to a 37–48 percent decline in child diarrheal disease mortality and was highly cost-effective. However, age (degradation) of water pipes and lack of complementary sanitation infrastructure attenuate these benefits. Our results suggest that childhood diarrheal disease mortality in Mexico would have declined by 86 percent if all municipalities had good quality infrastructure—a decline consistent with historical experience.
    Keywords: clean water, chlorination, child mortality, infectious disease, diarrhea, Mexico, cost-effectiveness, sanitation, behavioral responses
    Date: 2017–10–23
  9. By: Stefan Bauernschuster; Anastasia Driva; Erik Hornung
    Abstract: We investigate the impact on mortality of the world’s first compulsory health insurance, established by Otto von Bismarck, Chancellor of the German Empire, in 1884. Employing a multi-layered empirical setup, we draw on international comparisons and difference-in-differences strategies using Prussian administrative panel data to exploit differences in eligibility for insurance across occupations. All approaches yield a consistent pattern suggesting that Bismarck’s Health Insurance generated a significant mortality reduction. The results are largely driven by a decline of deaths from infectious diseases. We present prima facie evidence that diffusion of new hygiene knowledge through physicians was an important channel.
    Keywords: health insurance, mortality, demographic transition, Prussia
    JEL: I13 I18 N33 J11
    Date: 2017
  10. By: Mustafa Özer; Jan Fidrmuc; Mehmet Ali Eryurt
    Abstract: We study the causal effect of maternal education on childhood immunization rates. We use the Compulsory Education Law (CEL) of 1997, and the differentiation in its implementation across regions, as instruments for schooling of young mothers in Turkey. The CEL increased the compulsory years of schooling of those born after 1986 from 5 to 8 years. We find that education of mothers increases the probability of completing the full course of DPT and Hepatitis B vaccinations for their children. Furthermore, education increases the age of first marriage and birth, changes women`s and their spouse’s labour market status, and significantly affects women`s attitude towards spousal violence against women and gender discrimination in a manner that empowers women.
    Keywords: DPT (diphtheria, pertussis and tetanus), Hepatitis B, maternal education, autonomy of women, fertility, difference-in-difference-in-differences, instrumental variable
    JEL: H51 H52 I12
    Date: 2017
  11. By: Diana De Alwis; Ilan Noy
    Abstract: We measure to cost of extreme weather events (droughts and floods) on health care in Sri Lanka. We find that frequently occurring local floods and droughts impose a significant risk to health when individuals are exposed directly to these hazards, and when their communities are exposed, even if they themselves are unaffected. Those impacts, and especially the indirect spillover effects to households that are not directly affected, are associated with the land-use in the affected regions and with access to sanitation and hygiene. Finally, both direct and indirect risks associated with flood and drought on health have an economic cost; our estimates suggest Sri Lanka spends 52.8 million USD per year directly on the health care costs associated with floods and droughts, divided almost equally between the public and household sectors, and 22% vs. 78% between floods and droughts, respectively. In Sri Lanka, both the frequency and the intensity of droughts and floods are likely to increase because of climatic change. Consequently, the health burden associated with these events is only likely to increase, demanding precious resources that are required elsewhere.
    Keywords: Sri Lanka, flood, drought, health impact
    JEL: I15 Q54
    Date: 2017
  12. By: Frank R. Lichtenberg
    Abstract: The number of drugs approved by the FDA for treating cancer has increased substantially during the last 40 years. Moreover, cancer drug innovation has been accelerating: more than 8 times as many new cancer drugs were approved during 2005-2015 as were approved during 1975-1985 (66 vs. 8). During the period 2010-2014, the average annual growth rate of cancer drug expenditure was 7.6%--more than 3.6 times the average annual growth rate of nominal U.S. GDP. This has contributed to a lively debate about the value and cost-effectiveness of new cancer drugs. In this study, we attempt to assess the average cost-effectiveness in the U.S. in 2014 of new cancer drugs approved by the FDA during 2000-2014. Cost-effectiveness is measured as the ratio of the impact of new cancer drugs on medical expenditure to their impact on potential years of life lost due to cancer. We use a difference-in-difference research design: we investigate whether there were larger declines in premature mortality from the cancers that had larger increases in the number of drugs ever approved, controlling for the change in cancer incidence and mean age at time of diagnosis. The vast majority of the data we rely on are publicly available.
    Date: 2017
  13. By: Joan Costa-i-Font
    Abstract: We examine the presence of a systematic preference for independent living at old age which we refer as “institutionalization aversion” (IA). Given that IA is not observable from revealed preferences, we draw on a survey experiment to elicit individuals’ willingness to pay (WTP) to avoid institutionalization (e.g., in a nursing home), using a double-bounded referendum WTP format. Our results suggest robust evidence of IA and reveal a willingness to pay of up to 16% of respondent’s (individuals over fifty-five years of age) average income. We find that estimates of the willingness to pay to avoid institutionalization (or €292 at the time of the study) exceed the amount respondents are willing to pay for home health care at old age in the event of a mild impairment (€222). WTP estimates vary with income, age and especially, respondents’ housing conditions. Finally, we test the sensitivity of our estimates to anchoring effects and ‘yea-saying’ biases.
    Keywords: institutionalisation aversion, state-dependent preferences, home health care, willingness to pay, caregiving, referendum format
    JEL: R21 I18
    Date: 2017
  14. By: Lincoln Groves (Institute for Research on Poverty, University of Wisconsin-Madison); Sarah Hamersma (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Leonard M. Lopoo (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244)
    Abstract: The theoretical and empirical links between public health insurance access and fertility in the United States remain unclear. Utilizing a demographic cell-based estimation approach with panel data (1987-1997), we revisit the large-scale Medicaid expansions to pregnant women during the 1980s to estimate the heterogeneous impacts of public health insurance access on childbirth. While the decision to become a parent (i.e., the extensive margin) appears to be unaffected by increased access to Medicaid, we find that increased access to public health insurance positively influenced the number of high parity births (i.e., the intensive margin) for select groups of women. In particular, we find a robust, positive birth effect for unmarried women with a high school education, a result which is consistent across the two racial groups examined in our analysis: African American and white women. This result suggests that investigating effects along both the intensive and extensive margin is important for scholars who study the natalist effects of social welfare policies, and our evidence provides a more nuanced understanding of the influence of public health insurance on fertility.
    Keywords: Medicaid, Fertility, Parity
    JEL: I1 J13 J18
    Date: 2017–08
  15. By: David Dranove; Christopher Ody; Amanda Starc
    Abstract: Effectively designed market mechanisms may reduce growth in health care spending. In this paper, we study the impact of privatizing the delivery of Medicaid drug benefits on drug spending. Exploiting granular data that allow us to examine drug utilization, we find that drug spending would fall by 22.4 percent if the drug benefit was fully administered by Medicaid Managed Care Organizations (MCOs), largely through lower point-of-sale prices and greater generic usage. The effects are driven by MCOs’ ability to design drug benefits and steer consumers toward lower cost drugs and pharmacies. MCOs do not appear to skimp on performance, either by reducing overall drug consumption as measured by prescriptions per enrollee or reducing utilization of drugs that offset other medical spending.
    JEL: I11 I13 L10
    Date: 2017–10
  16. By: Joan Costa-i-Font; Divya Parmar
    Abstract: A growing literature studies the effect of enhancing the agency relationship between political incumbents and constituents on the use of health care, and specifically maternal and preventive care services. We examine the development of institutions of self-governance in India, and specifically the 2005 reform—the National Rural Health Mission that introduced village health and sanitation committees—to study the effects of the strengthening of the political agency on collective health care decision-making in rural areas. We examine maternal and preventative child health care use, before and after the introduction of village health and sanitation committees. Our results suggest that the introduction of village health and sanitation committees increases access to several maternal health care and some but not all immunisation services. The effect size is larger in larger villages and those closer to district headquarters. Part of the effect is driven by an increase in the utilization of the public healthcare network.
    Keywords: decentralization, direct democracy, India, immunization, maternal healthcare, public health care, preventative health care
    JEL: H70 I18
    Date: 2017

This nep-hea issue is ©2017 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.