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US Health and Aggregate Fluctuations

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  • Aleksandar Vasilev

    (American University in Bulgaria)

Abstract

This paper aims to shed light on the importance of health considerations for business cycle uctuations and the effect of health status on labor productivity and availability of labor input for productive use. To this end, Grossman's (2000) partial-equilibrium framework with endogenous health is incorporated in an otherwise standard Real-Business-Cycle (RBC) model. Health status in this setup is modelled as a utility-enhancing, intangible, and non-transferrable capital stock, which depreciates over time. The household can improve their health ("produce health") through investment using a health-recovery technology. The main results are: (i) overall, the model compares well vis-a-vis data; (ii) the behavior of the price of healthcare is adequately approximated by the shadow price of health in the model; (iii) the model-generated health variable exhibits moderate- to high correlation with a large number of empirical health indicators.

Suggested Citation

  • Aleksandar Vasilev, 2015. "US Health and Aggregate Fluctuations," Bulgarian Economic Papers bep-2015-01, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Feb 2015.
    • Handle: RePEc:sko:wpaper:bep-2015-01
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    File URL: https://www.uni-sofia.bg/index.php/eng/content/download/134595/994776/file/BEP-2015-01.pdf
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    References listed on IDEAS

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    1. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
    2. Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present and Future," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 217-238, June.
    3. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    4. Sergio Rebelo, 2005. "Real Business Cycle Models: Past, Present and Future," RCER Working Papers 522, University of Rochester - Center for Economic Research (RCER).
    5. 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 223-255, March-Apr.
    6. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    7. 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.
    8. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
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    Cited by:

    1. Aleksandar Vasilev, 2021. "A Real-Business-Cycle model with search-and-matching frictions and efficiency ("fair") wages," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 64(2), pages 1-23.
    2. Aleksandar Vasilev, 2018. "A Real-Business-Cycle model with reciprocity in labor relations and a government sector," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 61(2), pages 47-76.
    3. Vasilev, Aleksandar, 2022. "Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue EarlyCite, pages 1-24.
    4. Aleksandar Vasilev, 2015. "RBC Models and the Hours-Wages Puzzle: Puzzle Solved!," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 41.
    5. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with reciprocity in labor relations and fiscal policy: the case of Bulgaria," EconStor Preprints 156164, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    real business cycles; health status; health investment;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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