Topic 8: Externalities in Healthcare

Question 1

Give some examples of health related externalities

Answer 1

• Tobbaco & fat food causing health costs for government, family and increasing insurance premiums
• drunk driving
• second hand smoke
• infectious diseases
• lower productivity

Question 2

How has the obesity rate changed since 1970?

Answer 2

In 1970, 14% were obese -> 36% today

47% overweight -> 69% today

Question 3

Through what mechanism (broadly) has obesity increased?

Answer 3

Cutler et al shows the problem is a rise in calories consumer, not calories burned.

• major advances in junk food and high calory foods. Prices of these foods have decreased while more healthy foods (fruit & veg) have increased significantly
• Increase in female labour supply

Question 4

How does the health stock model work?

Answer 4

• Developed by Gross man (1972, 2000)
• Health is a stock, which must be replenished with health goods & time
• it also depreciates
• it is also consumed for utility (not clear if actually removed)
• days availiable for work determined by health stock

Question 5

What are the predictions of the Grossman health stock model?

Answer 5

• Increase in wage increases health stock
  
  • > and more health care spending due to higher absolute stock depreciation
• When agin occurs, more health g/s will be consumed, but not enought o stop stock depreciation

Question 6

In the health stock model, through what channels does healthcare g/s increase utility?

Answer 6

• Higher utility from good health
• less sick days, higher income
• higher productivity for a given set of time
• higher life expectancy

Question 7

Empirically, what factors contribute the most to healthcare for adults?

Answer 7

At the margin:

• not healthcare
• lifestyle factors
• socieeconomic & enviromental factors

Question 8

Emplically, what factors contribute the most to health production for infants?

Answer 8

• Medical care, especially at the margin
  
  • and especially those with low socio-economic groups
• secioeconomic & enviromental conditions
• maturnal lifestyle

Question 9

Empicirally, what factors contribute the most to health production for the elderly?

Answer 9

• Medical care (important at margin)

- Exercise & diet

Question 10

What should policy makers look at to imporive social health?

Answer 10

• raising education levels
• reducing poverty
• encouraging improved lifestyle

Question 11

Empirically, what effect does smoking one pack a day have on sick days?

Answer 11

10.9 more sick days every 6 months

Question 12

Empirically, what does one more year of shcooling have on health?

Answer 12

Dereases probability of dying in the next year by 3.6%

Question 13

What is the demand elasticity for primary health care?

Answer 13

-inelastic, -0.1 through -0.7

Question 14

Give the price elasticies for groups of food

Answer 14

between 0.3 and -0.8