IDEAS home Printed from https://ideas.repec.org/a/wly/quante/v7y2016i3p671-725.html
   My bibliography  Save this article

Why medical innovation is valuable: Health, human capital, and the labor market

Author

Listed:
  • Nicholas W. Papageorge

Abstract

I develop a dynamic framework to assess the value of pharmaceutical innovation, taking explicit account of how side effects and the labor market affect the demand for medical treatment. In the framework, forward‐looking patients do not simply maximize underlying health or longevity. Rather, they choose labor supply and medicine in light of potential side effects in an effort to jointly manage two forms of human capital: their health and their work experience. I use the framework to examine the treatment and employment decisions of human immunodeficiency virus (HIV) positive men before and after a medical breakthrough known as highly active anti‐retroviral treatment. A novelty of this application is my use of data containing both objective health measures along with reports of physical ailments. This allows me to model each HIV drug along two dimensions of quality—effectiveness and side effects. Using the framework, I am able to identify the impact of side effects on demand and show that counterfactual innovations that reduce side effects can be very valuable. I also show that when no treatment dominates along both dimensions of drug quality, patients exhibit health‐state‐dependent cyclicality in their medical treatment decisions, favoring effective treatments despite side effects when in poor health, but switching to less effective drugs with fewer side effects (or avoiding treatment altogether) when their health improves.

Suggested Citation

  • Nicholas W. Papageorge, 2016. "Why medical innovation is valuable: Health, human capital, and the labor market," Quantitative Economics, Econometric Society, vol. 7(3), pages 671-725, November.
    • Handle: RePEc:wly:quante:v:7:y:2016:i:3:p:671-725
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cronin, C.J.; Forsstrom, M.P.; Papageorge, N.W.;, 2017. "Mental Health, Human Capital and Labor Market Outcomes," Health, Econometrics and Data Group (HEDG) Working Papers 17/25, HEDG, c/o Department of Economics, University of York.
    2. Erkmen G. Aslim & Wei Fu & Chia-Lun Liu & Erdal Tekin, 2022. "Vaccination Policy, Delayed Care, and Health Expenditures," NBER Working Papers 30139, National Bureau of Economic Research, Inc.
    3. Gregory Jolivet & Fabien Postel-Vinay, 2020. "A Structural Analysis of Mental Health and Labor Market Trajectories," Bristol Economics Discussion Papers 20/726, School of Economics, University of Bristol, UK.
    4. Jeon, Sung-Hee & Pohl, R. Vincent, 2019. "Medical innovation, education, and labor market outcomes of cancer patients," Journal of Health Economics, Elsevier, vol. 68(C).
    5. Nicholas W. Papageorge & Matthew V. Zahn & Michèle Belot & Eline Broek-Altenburg & Syngjoo Choi & Julian C. Jamison & Egon Tripodi, 2021. "Socio-demographic factors associated with self-protecting behavior during the Covid-19 pandemic," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(2), pages 691-738, April.
    6. Rohan Dutta & David K. Levine & Nicholas W. Papageorge & Lemin Wu, 2018. "Entertaining Malthus: Bread, Circuses, And Economic Growth," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 358-380, January.
    7. Nicholas W. Papageorge, 2021. "Modeling Behavior during a Pandemic: Using HIV as an Historical Analogy," NBER Working Papers 28898, National Bureau of Economic Research, Inc.
    8. Bütikofer, Aline & Cronin, Christopher J. & Skira, Meghan M., 2020. "Employment effects of healthcare policy: Evidence from the 2007 FDA black box warning on antidepressants," Journal of Health Economics, Elsevier, vol. 73(C).
    9. Nicholas W. Papageorge & Gwyn C. Pauley & Mardge Cohen & Tracey E. Wilson & Barton H. Hamilton & Robert A. Pollak, 2021. "Health, Human Capital, and Domestic Violence," Journal of Human Resources, University of Wisconsin Press, vol. 56(4), pages 997-1030.
    10. Ejrnæs, Mette & García-Miralles, Esteban & Gørtz, Mette & Lundborg, Petter, 2023. "When Death Was Postponed: The Effect of HIV Medication on Work, Savings, and Marriage," IZA Discussion Papers 16228, Institute of Labor Economics (IZA).
    11. Barton H. Hamilton & Andrés Hincapié & Robert A. Miller & Nicholas W. Papageorge, 2021. "Innovation And Diffusion Of Medical Treatment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 953-1009, August.
    12. Madalina-Gabriela ANGHEL & Constantin ANGHELACHE & Georgiana NITA & Tudor SAMSON, 2017. "Human Resource Forecasting Models," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(4), pages 87-98, April.
    13. La Torre, Davide & Malik, Tufail & Marsiglio, Simone, 2020. "Optimal control of prevention and treatment in a basic macroeconomic–epidemiological model," Mathematical Social Sciences, Elsevier, vol. 108(C), pages 100-108.
    14. E.V. Popov, 2021. "Drivers of the Economy in the Context of the Coronavirus Pandemic," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 20(1), pages 5-30.
    15. Florin Paul Costel LILEA & Alexandru MANOLE & Maria MIREA & Andreea - Ioana MARINESCU, 2017. "Models Of Development Of Labour Productivity Forecast," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(4), pages 107-114, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:quante:v:7:y:2016:i:3:p:671-725. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.