Grossman’s Missing Health Threshold
AbstractWe 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. Our generalized solution addresses a significant criticism: the model’s prediction that health and medical care are positively related is consistently rejected by the data. We suggest structural and reduced form equations to test our generalized solution and contrast the predictions of the model with the empirical literature.
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Bibliographic InfoPaper provided by Geary Institute, University College Dublin in its series Working Papers with number 200947.
Length: 41 pages
Date of creation: 16 Dec 2009
Date of revision:
health; demand for health; health capital; medical care; labor;
Other versions of this item:
- 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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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Galama and Kapteyn: Grossman's Missing Threshold
by Liam Delaney in Geary Behaviour Centre on 2009-12-23 02:29:00
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CEIS Research Paper
152, Tor Vergata University, CEIS, revised 05 Dec 2012.
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