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Smoking and Health Investments: Impacts of Health Adaptation and Damage Reversibility

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Author Info

  • Carbone, Jared

    (Economics Department)

  • Kverndokk, Snorre

    ()
    (Ragnar Frisch Centre for Economic Research)

  • Røgeberg, Ole-Jørgen

    (Ragnar Frisch Centre for Economic Research)

Abstract

In the present paper we examine how different sets of beliefs about the health effects of smoking would influence a rational smoker. By embedding the rational addiction theory in a Grossman model of health investment modified to take account of psychological adaptation effects, we present a model of a rational addict that allows us to explicitly specify beliefs about a direct and indirect effect on both death risk and utility. This allows us to study how a rational addict would smoke with different beliefs of cancer risks, and with or without the well-documented ability to adapt to health changes. Numerical simulation results illustrate a number of different incentives that influence the smoking paths and health investments under the various beliefs, and suggests that beliefs have different impacts at different ages, providing a richer set of dynamics than might initially be expected.

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Bibliographic Info

Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2003:12.

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Length: 44 pages
Date of creation: 21 Jun 2009
Date of revision:
Handle: RePEc:hhs:oslohe:2003_012

Contact details of provider:
Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
Phone: 2307 5309
Fax: 2307 5310
Email:
Web page: http://www.hero.uio.no/eng.html
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Keywords: Rational addiction; Demand for health; Adaptation; Risk; Life extension;

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  1. Smith, George Davey & Shipley, Martin J., 1991. "Confounding of occupation and smoking: Its magnitude and consequences," Social Science & Medicine, Elsevier, vol. 32(11), pages 1297-1300, January.
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  3. Wu, Stephen, 2001. "Adapting to heart conditions: a test of the hedonic treadmill," Journal of Health Economics, Elsevier, vol. 20(4), pages 495-507, July.
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  14. Athanasios Orphanides & David Zervos, 1992. "Rational addiction with learning and regret," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 216, Board of Governors of the Federal Reserve System (U.S.).
  15. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  16. Jon Gjerde & Sverre Grepperud & Snorre Kverndokk, 1998. "Optimal Climate Policy under the Possibility of a Catastrophe," Discussion Papers, Research Department of Statistics Norway 209, Research Department of Statistics Norway.
  17. Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1253-69, December.
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