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The Grossman model after 40 years

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  • Peter Zweifel

Abstract

This editorial presents a critical review of the health model pioneered by Michael Grossman (MGM) in 1972 [ 8 ]. It argues that whereas the MGM has great charm for economists, it fails to achieve acceptance by interested laypersons and policy makers. The main reasons for this failure are: (1) the assumption of a long and fixed planning horizon, (2) a fixed ratio between individuals healthcare expenditure and the cost of their own health-enhancing efforts regardless of their state of health, and (3) their presumed ability to restore the state of health deemed optimal at a speed that does not depend on their state of health. An alternative formulation emphasizing the stochastic nature of health production is sketched that conceptually provides solutions to these three problems. In addition, it permits discarding a popular medical argument that seems to undermine the very basis of welfare analysis applied to health by claiming preferences to be unstable: “As long as you are healthy, you don’t give a damn, but as soon as you are sick, you are prepared to sacrifice everything to restore your health.” The editorial concludes by outlining a research program that may help health economists break away from their MGM fixation. Copyright Springer-Verlag 2012

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  • Peter Zweifel, 2012. "The Grossman model after 40 years," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(6), pages 677-682, December.
    • Handle: RePEc:spr:eujhec:v:13:y:2012:i:6:p:677-682
    DOI: 10.1007/s10198-012-0420-9
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    Cited by:

    1. Burggraf, Christine, 2017. "Russian demand for dietary quality: Nutrition transition, diet quality measurement, and health investment theory," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 86, number 86.
    2. Mihajlo Jakovljevic & Mirjana Jovanovic & Nemanja Rancic & Benjamin Vyssoki & Natasa Djordjevic, 2014. "LAT Software Induced Savings on Medical Costs of Alcohol Addicts' Care - Results from a Matched-Pairs Case-Control Study," PLOS ONE, Public Library of Science, vol. 9(11), pages 1-8, November.
    3. repec:zbw:iamost:269539 is not listed on IDEAS
    4. Glauben, Thomas & Grecksch, Wilfried & Burggraf, Christine, 2015. "Stochastic control of individual's health investments," EconStor Conference Papers 249588, ZBW - Leibniz Information Centre for Economics.
    5. Jochen Hartwig & Jan-Egbert Sturm, 2018. "Testing the Grossman model of medical spending determinants with macroeconomic panel data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(8), pages 1067-1086, November.
    6. Titus J. Galama & Hans van Kippersluis, 2013. "Health Inequalities through the Lens of Health Capital Theory: Issues, Solutions, and Future Directions," Tinbergen Institute Discussion Papers 13-076/V, Tinbergen Institute.
    7. Burggraf, Christine, 2017. "Russian demand for dietary quality: Nutrition transition, diet quality measurement, and health investment theory," Studies on the Agricultural and Food Sector in Transition Economies 269539, Institute of Agricultural Development in Transition Economies (IAMO).
    8. Andrew M. Jones & Audrey Laporte & Nigel Rice & Eugenio Zucchelli, 2019. "Dynamic panel data estimation of an integrated Grossman and Becker–Murphy model of health and addiction," Empirical Economics, Springer, vol. 56(2), pages 703-733, February.
    9. Rong Fu & Haruko Noguchi & Koichi Suga, 2016. "A Revisit to the Grossman Model with Endogenous Health Depreciation," Economics Bulletin, AccessEcon, vol. 36(4), pages 2405-2412.
    10. Shobande Olatunji Abdul, 2019. "Effects of Energy Use on Socioeconomic Predictors in Africa: Synthesizing Evidence," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 29(4), pages 21-40, December.
    11. Diogo Ferreira & Rui Marques, 2015. "Did the corporatization of Portuguese hospitals significantly change their productivity?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(3), pages 289-303, April.
    12. Bolin, Kristian & Caputo, Michael R, 2022. "Specification of the Health Production Function and its Behavioral Implications," Working Papers in Economics 821, University of Gothenburg, Department of Economics.
    13. Peter Zweifel, 2022. "Health economics explained through six questions and answers," Economic Affairs, Wiley Blackwell, vol. 42(1), pages 50-69, February.
    14. Caputo, Michael R., 2021. "New insights in the canonical model of health capital," Mathematical Social Sciences, Elsevier, vol. 110(C), pages 23-33.
    15. Zheng, Xiaodong & Shangguan, Shuangyue & Fang, Zuyi & Fang, Xiangming, 2021. "Early-life exposure to parental mental distress and adulthood depression among middle-aged and elderly Chinese," Economics & Human Biology, Elsevier, vol. 41(C).
    16. Peter Zweifel, 2016. "‘Catastrophic’ healthcare expenditure: critique of a problematic concept and a proposal," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(5), pages 519-520, June.

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