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The Subjective Costs of Health Losses due to Chronic Diseases: An Alternative Model Appraisal

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  • Ferrer-i-Carbonell, Ada

    ()
    (IAE Barcelona (CSIC))

  • van Praag, Bernard M. S.

    ()
    (University of Amsterdam)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 313.

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Length: 48 pages
Date of creation: Jun 2001
Date of revision:
Publication status: published in: Health Economics, 2002, 11 (8), 709 - 722; see IZA Reprints 164/03
Handle: RePEc:iza:izadps:dp313

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Related research

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

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References

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  1. 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.
  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. repec:dgr:uvatin:2000053 is not listed on IDEAS
  5. Jennifer Hunt, 2000. "Why Do People Still Live in East Germany?," NBER Working Papers 7564, National Bureau of Economic Research, Inc.
  6. Deaton, A., 1998. "Aging and Inequality in Income and Health," Papers 181, Princeton, Woodrow Wilson School - Development Studies.
  7. 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.
  8. Terza, Joseph V., 1987. "Estimating linear models with ordinal qualitative regressors," Journal of Econometrics, Elsevier, vol. 34(3), pages 275-291, March.
  9. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, vol. 107(445), pages 1815-31, November.
  10. 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.
  11. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
  12. Bruno S. Frey & Alois Stutzer, 1999. "Measuring Preferences by Subjective Well-Being," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 755-778, December.
  13. 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.
  14. Hunt, Jennifer, 1999. "Determinants of Non-Employment and Unemployment Durations in East Germany," CEPR Discussion Papers 2182, C.E.P.R. Discussion Papers.
  15. 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.
  16. 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.
  17. 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.
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