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Understanding the Economic Consequences of Shifting Trends in Population Health


  • Pierre-Carl Michaud
  • Dana Goldman
  • Darius Lakdawalla
  • Yuhui Zheng
  • Adam Gailey


The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy - with a concomitant decrease in the public-sector's annuity burden - but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

Suggested Citation

  • Pierre-Carl Michaud & Dana Goldman & Darius Lakdawalla & Yuhui Zheng & Adam Gailey, 2009. "Understanding the Economic Consequences of Shifting Trends in Population Health," NBER Working Papers 15231, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15231
    Note: HE

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    References listed on IDEAS

    1. MacKinnon, James G & Magee, Lonnie, 1990. "Transforming the Dependent Variable in Regression Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 315-339, May.
    2. Michaud Pierre-Carl & van Soest Arthur H.O. & Andreyeva Tatiana, 2007. "Cross-Country Variation in Obesity Patterns among Older Americans and Europeans," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-32, December.
    3. Michaud, Pierre-Carl & van Soest, Arthur, 2008. "Health and wealth of elderly couples: Causality tests using dynamic panel data models," Journal of Health Economics, Elsevier, vol. 27(5), pages 1312-1325, September.
    4. 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.
    5. Hilary W. Hoynes & Michael D. Hurd & Harish Chand, 1998. "Household Wealth of the Elderly under Alternative Imputation Procedures," NBER Chapters,in: Inquiries in the Economics of Aging, pages 229-257 National Bureau of Economic Research, Inc.
    6. Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," NBER Chapters,in: Perspectives on the Economics of Aging, pages 415-526 National Bureau of Economic Research, Inc.
    7. repec:aph:ajpbhl:1994:84:1:20-28_9 is not listed on IDEAS
    8. Rogers, Richard G. & Powell-Griner, Eve, 1991. "Life expectancies of cigarette smokers and nonsmokers in the United States," Social Science & Medicine, Elsevier, vol. 32(10), pages 1151-1159, January.
    9. Kapteyn, Arie & Michaud, Pierre-Carl & Smith, James P. & van Soest, Arthur, 2006. "Effects of Attrition and Non-Response in the Health and Retirement Study," IZA Discussion Papers 2246, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Pierre-Carl Michaud & Dana Goldman & Darius Lakdawalla & Adam Gailey & Yuhui Zheng, 2009. "International Differences in Longevity and Health and their Economic Consequences," NBER Working Papers 15235, National Bureau of Economic Research, Inc.
    2. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
    3. Anthony Webb & Natalia Zhivan, 2010. "How Much Is Enough? The Distribution of Lifetime Health Care Costs," Working Papers, Center for Retirement Research at Boston College wp2010-1, Center for Retirement Research, revised Feb 2010.
    4. Yang, Muzhe & Huang, Rui, 2010. "Exposure to Obesity and Weight Gain among Adolescents," Research Reports 149944, University of Connecticut, Food Marketing Policy Center.

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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