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The distribution problem in economic evaluation: income and the valuation of costs and consequences of health care programmes

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Author Info
Cam Donaldson (Departments of Economics and Community Health Sciences, and Centre for Health and Policy Studies, University of Calgary, Alberta, Canada)
Stephen Birch (Department of Clinical Epidemiology and Biostatistics and Centre for Health Economics and Policy Analysis, McMaster University, Canada)
Amiram Gafni (Department of Clinical Epidemiology and Biostatistics and Centre for Health Economics and Policy Analysis, McMaster University, Canada)
Abstract

To date, a common view in the health economics literature is that the applicability of cost-benefit analysis (CBA) is limited, due to the distribution problem which underlies its main method of valuation (e.g. willingness to pay). One view is that cost effectiveness analysis (CEA) overcomes these problems. We show that the same distributional concerns apply to non-monetary valuations of health consequences, to measurement of costs and to the decision rules of CEA. Hence adopting CEA over CBA cannot be justified on the basis of 'avoiding' distributional considerations. The implications of our results are discussed, including alternative strategies for the use of 'income-based' research findings in social decision-making. Copyright © 2001 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.642
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 11 (2002)
Issue (Month): 1 ()
Pages: 55-70
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Handle: RePEc:wly:hlthec:v:11:y:2002:i:1:p:55-70

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gerdtham, Ulf-G. & Johannesson, Magnus, 1999. "Income-Related Inequality in Life-Years and Quality-Adjusted Life-Years," Working Paper Series in Economics and Finance 334, Stockholm School of Economics. [Downloadable!]
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  2. Johannesson, Magnus & Jonsson, Bengt & Borgquist, Lars, 1991. "Willingness to pay for antihypertensive therapy -- results of a Swedish pilot study," Journal of Health Economics, Elsevier, vol. 10(4), pages 461-473. [Downloadable!] (restricted)
  3. Koopmanschap, Marc A. & Rutten, Frans F. H. & van Ineveld, B. Martin & van Roijen, Leona, 1995. "The friction cost method for measuring indirect costs of disease," Journal of Health Economics, Elsevier, vol. 14(2), pages 171-189, June. [Downloadable!] (restricted)
  4. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June. [Downloadable!] (restricted)
  5. Kenkel, Don, 1997. "On valuing morbidity, cost-effectiveness analysis, and being rude," Journal of Health Economics, Elsevier, vol. 16(6), pages 749-757, December. [Downloadable!] (restricted)
  6. Currie, John Martin & Murphy, John A & Schmitz, Andrew, 1971. "The Concept of Economic Surplus and its Use in Economic Analysis," Economic Journal, Royal Economic Society, vol. 81(324), pages 741-99, December. [Downloadable!] (restricted)
  7. Brekke, Kjell Arne, 1997. "The numeraire matters in cost-benefit analysis," Journal of Public Economics, Elsevier, vol. 64(1), pages 117-123, April. [Downloadable!] (restricted)
  8. Weinstein, Milton C. & Manning, Willard Jr., 1997. "Theoretical issues in cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 121-128, February. [Downloadable!] (restricted)
  9. Gafni, Amiram & Birch, Stephen, 1991. "Equity considerations in utility-based measures of health outcomes in economic appraisals: An adjustment algorithm," Journal of Health Economics, Elsevier, vol. 10(3), pages 329-342, October. [Downloadable!] (restricted)
  10. Wagstaff, Adam, 1991. "QALYs and the equity-efficiency trade-off," Journal of Health Economics, Elsevier, vol. 10(1), pages 21-41, May. [Downloadable!] (restricted)
  11. Culyer, A J, 1989. "The Normative Economics of Health Care Finance and Provision," Oxford Review of Economic Policy, Oxford University Press, vol. 5(1), pages 34-58, Spring.
  12. Pratt, John W & Zeckhauser, Richard J, 1996. "Willingness to Pay and the Distribution of Risk and Wealth," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 747-63, August. [Downloadable!] (restricted)
  13. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephen Birch & Amiram Gafni, 2002. "On being NICE in the UK: guidelines for technology appraisal for the NHS in England and Wales," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 185-191. [Downloadable!]
  2. David Whynes & Emma Frew & Jane Wolstenholme, 2005. "Willingness-to-Pay and Demand Curves: A Comparison of Results Obtained Using Different Elicitation Formats," International Journal of Health Care Finance and Economics, Springer, vol. 5(4), pages 369-386, December. [Downloadable!] (restricted)
  3. Bernard van denBerg & Werner Brouwer & Job van Exel & Marc Koopmanschap, 2005. "Economic valuation of informal care: the contingent valuation method applied to informal caregiving," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 169-183. [Downloadable!]
  4. Rachel Baker & Angela Robinson, 2004. "Responses to standard gambles: are preferences 'well constructed'?," Health Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 37-48. [Downloadable!]
  5. Tim Callan & Claire Keane, 2008. "Non-Cash Benefits and the Distribution of Economic Welfare," Papers WP245, Economic and Social Research Institute (ESRI). [Downloadable!]
    Other versions:
  6. Josephine Borghi, 2008. "Aggregation rules for cost-benefit analysis: a health economics perspective," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 863-875. [Downloadable!]
  7. Liqun Liu & Andrew J. Rettenmaier & Thomas R. Saving, 2008. "Longevity bias in cost-effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 17(4), pages 523-534. [Downloadable!]
  8. Laura J. Damschroder & Peter A. Ubel & Jason Riis & Dylan M. Smith, 2007. "An alternative approach for eliciting willingness-to-pay: A randomized Internet trial," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 96-106, April. [Downloadable!]
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