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The medical care costs of obesity: An instrumental variables approach

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  • Cawley, John
  • Meyerhoefer, Chad

Abstract

This paper is the first to use the method of instrumental variables (IV) to estimate the impact of obesity on medical costs in order to address the endogeneity of weight and to reduce the bias from reporting error in weight. Models are estimated using restricted-use data from the Medical Expenditure Panel Survey for 2000–2005. The IV model, which exploits genetic variation in weight as a natural experiment, yields estimates of the impact of obesity on medical costs that are considerably higher than the estimates reported in the previous literature. For example, obesity is associated with $656 higher annual medical care costs, but the IV results indicate that obesity raises annual medical costs by $2741 (in 2005 dollars). These results imply that the previous literature has underestimated the medical costs of obesity, resulting in underestimates of the economic rationale for government intervention to reduce obesity-related externalities.

Suggested Citation

  • Cawley, John & Meyerhoefer, Chad, 2012. "The medical care costs of obesity: An instrumental variables approach," Journal of Health Economics, Elsevier, vol. 31(1), pages 219-230.
  • Handle: RePEc:eee:jhecon:v:31:y:2012:i:1:p:219-230
    DOI: 10.1016/j.jhealeco.2011.10.003
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    More about this item

    Keywords

    Obesity; Externalities; Medical care costs; Insurance;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D6 - Microeconomics - - Welfare Economics

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