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Grossman’s missing health threshold

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Author Info

  • Galama, Titus
  • Kapteyn, Arie

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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 30 (2011)
Issue (Month): 5 ()
Pages: 1044-1056

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Handle: RePEc:eee:jhecon:v:30:y:2011:i:5:p:1044-1056

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Web page: http://www.elsevier.com/locate/inca/505560

Related research

Keywords: Health; Demand for health; Health capital; Medical care; Labor;

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References

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  1. Gerdtham, Ulf-G & Johannesson, Magnus, 1997. "New Estimates of the Demand for Health: Results Based on a Categorical Health Measure and Swedish Micro Data," Working Paper Series in Economics and Finance 205, Stockholm School of Economics.
  2. Dana P. Goldman & James P. Smith, 2004. "Can Patient Self-Management Help Explain the SES Health Gradient?," HEW 0403004, EconWPA.
  3. Cropper, M L, 1981. "Measuring the Benefits from Reduced Morbidity," American Economic Review, American Economic Association, vol. 71(2), pages 235-40, May.
  4. Muurinen, Jaana-Marja & Le Grand, Julian, 1985. "The economic analysis of inequalities in health," Social Science & Medicine, Elsevier, vol. 20(10), pages 1029-1035, January.
  5. James P. Smith, 2005. "Unraveling the SES-Health Connection," Labor and Demography 0505018, EconWPA.
  6. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2013. "What Good Is Wealth Without Health? The Effect Of Health On The Marginal Utility Of Consumption," Journal of the European Economic Association, European Economic Association, vol. 11, pages 221-258, 01.
  7. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August.
  8. James P. Smith, 2007. "The Impact of Socioeconomic Status on Health over the Life-Course," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
  9. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August.
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  11. Grossman, Michael, 2000. "The human capital model," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 7, pages 347-408 Elsevier.
  12. Titus Galama & Arie Kapteyn & Raquel Fonseca & Pierre-Carl Michaud, 2008. "Grossman's Health Threshold and Retirement," Working Papers 658, RAND Corporation Publications Department.
  13. Cropper, M L, 1977. "Health, Investment in Health, and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1273-94, December.
  14. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
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  16. Van de Ven, Wynand P. M. M. & Van Der Gaag, Jacques, 1982. "Health as an unobservable : A MIMIC-model of demand for health care," Journal of Health Economics, Elsevier, vol. 1(2), pages 157-183, August.
  17. van Kippersluis, Hans & Van Ourti, Tom & O'Donnell, Owen & van Doorslaer, Eddy, 2009. "Health and income across the life cycle and generations in Europe," Journal of Health Economics, Elsevier, vol. 28(4), pages 818-830, July.
  18. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "The demand for health: results from new measures of health capital," European Journal of Political Economy, Elsevier, vol. 15(3), pages 501-521, September.
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  20. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, October.
  21. van Kippersluis, Hans & O'Donnell, Owen & van Doorslaer, Eddy & Van Ourti, Tom, 2010. "Socioeconomic differences in health over the life cycle in an Egalitarian country," Social Science & Medicine, Elsevier, vol. 70(3), pages 428-438, February.
  22. Wolfe, John R, 1985. "A Model of Declining Health and Retirement," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1258-67, December.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Galama and Kapteyn: Grossman's Missing Threshold
    by Liam Delaney in Geary Behaviour Centre on 2009-12-23 02:29:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Fabrizio Mazzona & Franco Peracchi, 2010. "Ageing, cognitive abilities and retirement," EIEF Working Papers Series 1015, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2012.
  2. Hullegie, P.G.J., 2012. "Essays on health and labor economics," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5637283, Tilburg University.
  3. Titus J. Galama & Patrick Hullegie & Erik Meijer & Sarah Outcault, 2012. "Is There Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model?," Health Economics, John Wiley & Sons, Ltd., vol. 21(9), pages 1080-1100, 09.
  4. Peter Zweifel, 2012. "The Grossman model after 40 years," The European Journal of Health Economics, Springer, vol. 13(6), pages 677-682, December.
  5. Titus J. Galama & Hans van Kippersluis, 2010. "A Theory of Socioeconomic Disparities in Health over the Life Cycle," Tinbergen Institute Discussion Papers 10-079/3, Tinbergen Institute.

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