IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Is There Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model?

  • Titus J. Galama
  • Patrick Hullegie
  • Erik Meijer
  • Sarah Outcault

We estimate a health investment equation, derived from a health capital model that is an extension of the well-known Grossman model. Of particular interest is whether the health production function has constant returns to scale, as in the standard Grossman model, or decreasing returns to scale, as in the Ehrlich-Chuma model and extensions thereof. The model with decreasing returns to scale has a number of theoretically and empirically desirable characteristics that the constant returns model does not have. Although our empirical equation does not point-identify the decreasing returns to scale curvature parameter, it does allow us to test for constant versus decreasing returns to scale. The results are suggestive of decreasing returns and in line with prior estimates from the literature. But when we attempt to control for the endogeneity of health by using instrumental variables, the results become inconclusive. This brings into question the robustness of prior estimates in this literature.

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 21 (2012)
Issue (Month): 9 (09)
Pages: 1080-1100

as
in new window

Handle: RePEc:wly:hlthec:v:21:y:2012:i:9:p:1080-1100
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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.:

as in new window
  1. van den Berg, Gerard J. & Deeg, Dorly J. H. & Lindeboom, Maarten & Portrait, France, 2010. "The Role of Early-Life Conditions in the Cognitive Decline due to Adverse Events Later in Life," IZA Discussion Papers 4780, Institute for the Study of Labor (IZA).
  2. Pierre-André Chiappori & Monica Paiella, 2008. "Relative Risk Aversion Is Constant: Evidence from Panel Data," Discussion Papers 5_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  3. Galama, Titus & Kapteyn, Arie, 2011. "Grossman’s missing health threshold," Journal of Health Economics, Elsevier, vol. 30(5), pages 1044-1056.
  4. Meijer, E. & Wansbeek, T., 2000. "Measurement error in a single regressor," Research Report 00F14, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  5. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
  6. Peter P. Wakker, 2008. "Explaining the characteristics of the power (CRRA) utility family," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1329-1344.
  7. Gerdtham, Ulf-G. & Johannesson, Magnus, 1999. "New estimates of the demand for health: results based on a categorical health measure and Swedish micro data," Social Science & Medicine, Elsevier, vol. 49(10), pages 1325-1332, November.
  8. Erik Meijer & Arie Kapteyn & Tatiana Andreyeva, 2008. "Health Indexes and Retirement Modeling in International Comparisons," Working Papers 614, RAND Corporation Publications Department.
  9. repec:att:wimass:9430 is not listed on IDEAS
  10. repec:dgr:rugsom:00f14 is not listed on IDEAS
  11. Finkelstein, Amy & Luttmer, Erzo F. P. & Notowidigdo, Matthew J., 2008. "What Good Is Wealth without Health? The Effect of Health on the Marginal Utility of Consumption," Working Paper Series rwp08-036, Harvard University, John F. Kennedy School of Government.
  12. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
  13. Gerard J. van den Berg & Maarten Lindeboom & France Portrait, 2006. "Economic Conditions Early in Life and Individual Mortality," American Economic Review, American Economic Association, vol. 96(1), pages 290-302, March.
  14. Ried, Walter, 1998. "Comparative dynamic analysis of the full Grossman model," Journal of Health Economics, Elsevier, vol. 17(4), pages 383-425, August.
  15. 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.
  16. Titus Galama, 2015. "A Contribution to Health-Capital Theory," Working Papers 2015-008, Human Capital and Economic Opportunity Working Group.
  17. Hay, Joel W & Olsen, Randall J, 1984. "Let Them Eat Cake: A Note on Comparing Alternative Models of the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(3), pages 279-82, July.
  18. 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.
  19. 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.
  20. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1, March.
  21. Grossman, Michael, 1998. "On optimal length of life," Journal of Health Economics, Elsevier, vol. 17(4), pages 499-509, August.
  22. Cropper, M L, 1977. "Health, Investment in Health, and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1273-94, December.
  23. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
  24. 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.
  25. Attanasio, Orazio P & Weber, Guglielmo, 1989. "Intertemporal Substitution, Risk Aversion and the Euler Equation for Consumption," Economic Journal, Royal Economic Society, vol. 99(395), pages 59-73, Supplemen.
  26. Wagstaff, Adam, 1986. "The demand for health : Some new empirical evidence," Journal of Health Economics, Elsevier, vol. 5(3), pages 195-233, September.
  27. 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.
  28. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  29. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:21:y:2012:i:9:p:1080-1100. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.