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Grossman's Missing Health Threshold

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Author Info
Titus J. Galama ()
Arie Kapteyn ()

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Abstract

The authors present a generalized solution to Grossman's model of health capital (1972), relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an "optimal" level without adjustment costs. The Grossman model then predicts the existence of a health threshold above which individuals do not demand medical care. Their generalized solution addresses a significant criticism: the model's prediction that health and medical care are positively related is consistently rejected by the data. They suggest structural and reduced form equations to test their generalized solution and contrast the predictions of the model with the empirical literature.

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Paper provided by RAND Corporation Publications Department in its series Working Papers with number 684.

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Length: 42 pages
Date of creation: May 2009
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Handle: RePEc:ran:wpaper:684

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Find related papers by JEL classification:
I10 - Health, Education, and Welfare - - Health - - - General
I12 - Health, Education, and Welfare - - Health - - - Health Production
J00 - Labor and Demographic Economics - - General - - - General
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James P. Smith, 2007. "The Impact of Socioeconomic Status on Health over the Life-Course," Journal of Human Resources, University of Wisconsin Press, vol. 42(4). [Downloadable!] (restricted)
  2. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr. [Downloadable!] (restricted)
  3. Wolfe, John R, 1985. "A Model of Declining Health and Retirement," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1258-67, December. [Downloadable!] (restricted)
  4. Grossman, Michael, 2000. "The human capital model," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 7, pages 347-408 Elsevier. [Downloadable!] (restricted)
  5. Van de Ven, Wynand P. M. M. & Van Der Gaag, Jacques, 1982. "Health as an unobservable : A MIMIC-model of demand for health care," Journal of Health Economics, Elsevier, vol. 1(2), pages 157-183, August. [Downloadable!] (restricted)
  6. Cropper, M L, 1981. "Measuring the Benefits from Reduced Morbidity," American Economic Review, American Economic Association, vol. 71(2), pages 235-40, May. [Downloadable!] (restricted)
  7. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "The demand for health: results from new measures of health capital," European Journal of Political Economy, Elsevier, vol. 15(3), pages 501-521, September. [Downloadable!] (restricted)
  8. Wagstaff, Adam, 1986. "The demand for health : Some new empirical evidence," Journal of Health Economics, Elsevier, vol. 5(3), pages 195-233, September. [Downloadable!] (restricted)
  9. Ehrlich, Isaac & Chuma, Hiroyuki, 1990. "A Model of the Demand for Longevity and the Value of Life Extension," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 761-82, August. [Downloadable!] (restricted)
  10. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August. [Downloadable!] (restricted)
  11. Anne Case & Angus S. Deaton, 2005. "Broken Down by Work and Sex: How Our Health Declines," NBER Chapters, in: Analyses in the Economics of Aging, pages 185-212 National Bureau of Economic Research, Inc. [Downloadable!]
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