Lecture 4 Flashcards
Health outcomes at micro level
- It is a consumption good
- it is a production input
- it is an investment good
Dupas
A person’s health stock in any year is a function of her health stock at the beginning of the year, the health stocks (and depreciation) that she experiences and the health care she receives
Health shocks
Determined by the exposure to health risks, choices regarding health input use and health behaviours
When hit by a health shock, the
- types, qualities and prices of available health cares ervices
- houshold health care financing options (budget constraint)
help determine choices regarding the type, quantity and quality of health care treatment received
Dupas barriers for adoption of preventive behaviou
- information
- Learning
- cash, credit, constraints
- behavioural biases
Lack of information on
> health risks
> prevention techniques
Health risks
> Determined by serverity of the shock
> more aware on preventive techniques
provision of information depends on
- source
- type
- target group
Externality
any positive or negative effect hat a market transaction imposes on a third party
positive externality: motivational benefits for living among active people (the social gain is greater than the private gain)
negative externality: second-hand smoke
private welfare
the utility level isolated to one individual within a society
social welfare
the summed utility levels of all individuals within a society
pigourvian subsidy or tax
a subsidy or tax designed to “internalize” an externality by altering private costs and benefits
> subsidies encourage more consumption of goods with positive externalities
> taxes reduce consumption of goods with negative extrnalities
The coase theorem
resources will be used efficiently to maximize social welfare, even in the face of externalities, given conditions:
> property rights are well defineed
> transaction costs or bargaining costs are sufficiently low
Financial constraints
- Liquidity or cash constraints
- credit constraints
Expanding liquidity/ access to credit may not increase investments in preventive health (due to behavioral constrants)
Saving constraints
> health poverty trap: high expenditures on curative health may hamper svings for peventive halth
financial services are often missing in poor households
risk of expropriation
self-control problems
Behavioural biases
Ptential deviations from the standard naoclassical model of rational decision-making with individuals maximizing their utility subject to a budget constraint
- nonstandard preferences
- nonstandard beliefs about probabilitites
- nonstandard decision-making
Beta-delta discounting model
Individuals derive utility from present joys and from anticipation of future happiness
Utility is a weighted sum of instantaneuos utlitlty levels from the present period and all future periods
- utility from any future period receives extra devaluation
- utility in the present is valued especially highly, moe highly than it would be bases on the discount rate alone (present bias)
- the closer beta is to zero, the more future utitlity is discounted and the greater the bias is towards the present
Discounting function
Indicates how much an individual values utility in present and future periods
time-consistend preferences
preferences shared across al selves, so that future selves will not alter a plan that a previous self found optimal
Only if Beta = 1
It is unrealistic as plans could always change, preferences of future self are not the same as present day self. However; if past and present selves agree on the best course in a given circumstance, an individual’s preferences are time-consistent
hyperbolically discounted preferences
Steep discounting of utility in the near future and flatter discounting of utility in the far future
Time inconsistent
> future selves will sometimes alter a plan that a previous self found optimal
> myopic preferences
