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The Subjective Costs of Health Losses Due to Chronic Diseases: An Alternative Model for Monetary Appraisal

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  • Ada Ferrer-i-Carbonell
  • Bernard M. S. van Praag

Abstract

This paper proposes a method to evaluate health losses or gains by looking at the impact on well-being of a change in health status. The paper presents estimates of the equivalent income change that would be necessary to change general satisfaction with life to the same extent as a change in health satisfaction would do. In other words, we estimate the income equivalent of health changes. Next, the health satisfaction changes are linked to specific diseases in order to estimate the income equivalent for various diseases. This method uses answers to well-being and health satisfaction questions as posed in a large German data set. We distinguish between workers and non-workers and between inhabitants of East- and West- Germany. We find, for instance, that for West-workers hearing impediments are on average equivalent to an income reduction of about 20%, and that heart blood difficulties are for the same group equivalent to a 47% income reduction.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38572.de/dp262.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 262.

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Length: o.Pag. p.
Date of creation: 2001
Date of revision:
Handle: RePEc:diw:diwwpp:dp262

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Keywords: chronic diseases; equivalent income; health damages; health satisfaction; well-being.;

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References

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  1. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics.
  2. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  3. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  4. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
  5. Torrance, George W., 1986. "Measurement of health state utilities for economic appraisal : A review," Journal of Health Economics, Elsevier, vol. 5(1), pages 1-30, March.
  6. Bernard M.S. van Praag & P. Frijters & A. Ferrer-i-Carbonell, 2000. "A Structural Model of Well-being: with an application to German Data," Tinbergen Institute Discussion Papers 00-053/3, Tinbergen Institute.
  7. Jennifer Hunt, 2000. "Why Do People Still Live in East Germany?," Discussion Papers of DIW Berlin 201, DIW Berlin, German Institute for Economic Research.
  8. Hurley, Jeremiah, 2000. "An overview of the normative economics of the health sector," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 2, pages 55-118 Elsevier.
  9. Samuelson, Paul A, 1974. "Complementarity-An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1255-89, December.
  10. Terza, Joseph V., 1987. "Estimating linear models with ordinal qualitative regressors," Journal of Econometrics, Elsevier, vol. 34(3), pages 275-291, March.
  11. G. Ardine De Wit & Jan J.V. Busschbach & Frank Th. De Charro, 2000. "Sensitivity and perspective in the valuation of health status: whose values count?," Health Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 109-126.
  12. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  13. Bernard M.S. van Praag & P. Frijters & A. Ferrer-i-Carbonell, 2000. "A Structural Model of Well-being: with an application to German Data," Tinbergen Institute Discussion Papers 00-053/3, Tinbergen Institute.
  14. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
  15. Hunt, Jennifer, 1999. "Determinants of Non-Employment and Unemployment Durations in East Germany," CEPR Discussion Papers 2182, C.E.P.R. Discussion Papers.
  16. Bruno S. Frey & Alois Stutzer, 1999. "Measuring Preferences by Subjective Well-Being," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, T├╝bingen, vol. 155(4), pages 755-778, December.
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