IDEAS home Printed from https://ideas.repec.org/p/abn/wpaper/auwp2013-07.html
   My bibliography  Save this paper

Efficient Self-Protection and Progress in Curing-Technology

Author

Listed:
  • Gilad Sorek

Abstract

The direct medical costs associated with obesity, smoking, and other non-healthy habits are estimated to account for more than 20% of U.S. health spending. Hence, poor health choices induce significant aggregate shift in spending away from treating competing?non preventable?medical risks and from nonmedical consumption. Such a shift in spending distorts relative incentives to innovate in different sectors, through market-size effect. As consumers fail to internalize these aggregate-level externalities, private-prevention is generally inefficient. We show that private prevention is insufficient compared with social optimum, unless technological opportunities to develop cures for preventable diseases are sufficiently superior. Furthermore, under multiple preventable-risks, prevention efforts are biased in favor of the risk with higher potential for curing advances.

Suggested Citation

  • Gilad Sorek, 2013. "Efficient Self-Protection and Progress in Curing-Technology," Auburn Economics Working Paper Series auwp2013-07, Department of Economics, Auburn University.
  • Handle: RePEc:abn:wpaper:auwp2013-07
    as

    Download full text from publisher

    File URL: https://cla.auburn.edu/econwp/Archives/2013/2013-07.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    2. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence from the Vaccine Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 527-564.
    3. Tomas J. Philipson & Richard A. Posner, 2008. "Is the Obesity Epidemic a Public Health Problem? A Review of Zoltan J. Acs and Alan Lyles's Obesity, Business and Public Policy," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 974-982, December.
    4. 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.
    5. Yaniv, Gideon & Rosin, Odelia & Tobol, Yossef, 2009. "Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 823-830, June.
    6. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
    7. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1049-1090.
    8. Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
    9. Tomas J. Philipson & William H. Dow & Xavier Sala-i-Martin, 1999. "Longevity Complementarities under Competing Risks," American Economic Review, American Economic Association, vol. 89(5), pages 1358-1371, December.
    10. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    11. repec:mpr:mprres:7163 is not listed on IDEAS
    12. Ellis, Randall P. & Manning, Willard G., 2007. "Optimal health insurance for prevention and treatment," Journal of Health Economics, Elsevier, vol. 26(6), pages 1128-1150, December.
    13. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    2. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
    3. Pierre Dubois & Olivier de Mouzon & Fiona Scott-Morton & Paul Seabright, 2015. "Market size and pharmaceutical innovation," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 844-871, October.
    4. Davide Dragone & Francesco Manaresi & Luca Savorelli, 2016. "Obesity and Smoking: can we Kill Two Birds with one Tax?," Health Economics, John Wiley & Sons, Ltd., vol. 25(11), pages 1464-1482, November.
    5. Margaret K. Kyle, 2019. "The Alignment of Innovation Policy and Social Welfare: Evidence from Pharmaceuticals," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 95-123, National Bureau of Economic Research, Inc.
    6. Jay Bhattacharya & Mikko Packalen, 2008. "Is Medicine an Ivory Tower? Induced Innovation, Technological Opportunity, and For-Profit vs. Non-Profit Innovation," NBER Working Papers 13862, National Bureau of Economic Research, Inc.
    7. Kalcheva, Ivalina & McLemore, Ping & Pant, Shagun, 2018. "Innovation: The interplay between demand-side shock and supply-side environment," Research Policy, Elsevier, vol. 47(2), pages 440-461.
    8. Heidi L. Williams, 2016. "Intellectual Property Rights and Innovation: Evidence from Health Care Markets," Innovation Policy and the Economy, University of Chicago Press, vol. 16(1), pages 53-87.
    9. Iizuka, Toshiaki & Uchida, Gyo, 2017. "Promoting innovation in small markets: Evidence from the market for rare and intractable diseases," Journal of Health Economics, Elsevier, vol. 54(C), pages 56-65.
    10. Agarwal, Ruchir & Gaule, Patrick, 2021. "What Drives Innovation? Lessons from COVID-19 R&D," IZA Discussion Papers 14079, Institute of Labor Economics (IZA).
    11. Mary K. Olson & Nina Yin, 2018. "Examining Firm Responses to R&D Policy: An Analysis of Pediatric Exclusivity," American Journal of Health Economics, MIT Press, vol. 4(3), pages 321-357, Summer.
    12. Zhang, Xuan & Nie, Huihua, 2021. "Public health insurance and pharmaceutical innovation: Evidence from China," Journal of Development Economics, Elsevier, vol. 148(C).
    13. D. Dragone & F. Manaresi & L. Savorelli, 2013. "Obesity and smoking: can we catch two birds with one tax?," Working Papers wp873, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Leila Agha & Soomi Kim & Danielle Li, 2020. "Insurance Design and Pharmaceutical Innovation," NBER Working Papers 27563, National Bureau of Economic Research, Inc.
    15. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
    16. Zarko Kalamov, 2020. "A sales tax is better at promoting healthy diets than the fat tax and the thin subsidy," Health Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 353-366, March.
    17. Rzakhanov, Zaur, 2008. "Regulatory policy, value of knowledge assets and innovation strategy: The case of the Orphan Drug Act," Research Policy, Elsevier, vol. 37(4), pages 673-689, May.
    18. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2013. "Income and Health Spending: Evidence from Oil Price Shocks," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1079-1095, October.
    19. Nicholas Bagley & Benjamin Berger & Amitabh Chandra & Craig Garthwaite & Ariel D. Stern, 2018. "The Orphan Drug Act at 35: Observations and an Outlook for the Twenty-First Century," NBER Chapters, in: Innovation Policy and the Economy, Volume 19, pages 97-137, National Bureau of Economic Research, Inc.
    20. Chee-Ruey Hsieh & Ya-Ming Liu & Chia-Lin Chang, 2013. "Endogenous technological change in medicine and its impact on healthcare costs: evidence from the pharmaceutical market in Taiwan," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(2), pages 287-295, April.

    More about this item

    Keywords

    Self-Protection; Efficient Prevention; Medical Innovation;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abn:wpaper:auwp2013-07. 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: . General contact details of provider: https://edirc.repec.org/data/deaubus.html .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hyeongwoo Kim (email available below). General contact details of provider: https://edirc.repec.org/data/deaubus.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.