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Efficient Self-Protection and Progress in Curing-Technology

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  • Gilad Sorek

Abstract

The direct medical costs associated with obesity, smoking, and other non-healthy habits are estimated to account for more than 20% of U.S. health spending. Hence, poor health choices induce significant aggregate shift in spending away from treating competing?non preventable?medical risks and from nonmedical consumption. Such a shift in spending distorts relative incentives to innovate in different sectors, through market-size effect. As consumers fail to internalize these aggregate-level externalities, private-prevention is generally inefficient. We show that private prevention is insufficient compared with social optimum, unless technological opportunities to develop cures for preventable diseases are sufficiently superior. Furthermore, under multiple preventable-risks, prevention efforts are biased in favor of the risk with higher potential for curing advances.

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Bibliographic Info

Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2013-07.

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Date of creation: Apr 2013
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Handle: RePEc:abn:wpaper:auwp2013-07

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Keywords: Self-Protection; Efficient Prevention; Medical Innovation;

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  1. John Cawley & Chad Meyerhoefer, 2010. "The Medical Care Costs of Obesity: An Instrumental Variables Approach," NBER Working Papers 16467, National Bureau of Economic Research, Inc.
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  10. Ellen E. Bouchery & Henrick J. Harwood & Jeffrey J. Sacks & Carol J. Simon & Robert D. Brewer, 2011. "Economic Costs of Excessive Alcohol Consumption in the U.S., 2006," Mathematica Policy Research Reports 7163, Mathematica Policy Research.
  11. Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
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