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The Value of Health and Longevity

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  • Kevin M. Murphy
  • Robert H. Topel

Abstract

We develop an economic framework for valuing improvements to health and life expectancy, based on individuals' willingness to pay. We then apply the framework to past and prospective reductions in mortality risks, both overall and for specific life-threatening diseases. We calculate (i) the social values of increased longevity for men and women over the 20th century; (ii) the social value of progress against various diseases after 1970; and (iii) the social value of potential future progress against various major categories of disease. The historical gains from increased longevity have been enormous. Over the 20th century, cumulative gains in life expectancy were worth over $1.2 million per person for both men and women. Between 1970 and 2000 increased longevity added about $3.2 trillion per year to national wealth, an uncounted value equal to about half of average annual GDP over the period. Reduced mortality from heart disease alone has increased the value of life by about $1.5 trillion per year since 1970. The potential gains from future innovations in health care are also extremely large. Even a modest 1 percent reduction in cancer mortality would be worth nearly $500 billion.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11405.

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Date of creation: Jun 2005
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Publication status: published as Murphy, Kevin M. and Robert H. Topel. "The Value Of Health And Longevity," Journal of Political Economy, 2006, v114 (No. 5, Oct), 871-904.
Handle: RePEc:nbr:nberwo:11405

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  1. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  2. repec:reg:wpaper:282 is not listed on IDEAS
  3. repec:reg:rpubli:282 is not listed on IDEAS
  4. Browning, Martin & Hansen, Lars Peter & Heckman, James J., 1999. "Micro data and general equilibrium models," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 8, pages 543-633 Elsevier.
  5. Martin Browning & Thomas F. Crossley, 2000. "The Life Cycle Model of Consumption and Saving," Social and Economic Dimensions of an Aging Population Research Papers 28, McMaster University.
  6. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, vol. 27(1), pages 5-76, August.
  7. Robert H. Topel & Finis Welch, 1986. "Efficient Labor Contracts with Employmeny Risk," UCLA Economics Working Papers 399, UCLA Department of Economics.
  8. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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