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A Contribution to Health Capital Theory

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  • Titus Galama

Abstract

This paper presents a theory of the demand for health, health investment and longevity, building on the human capital framework for health and addressing limitations of existing models. It predicts a negative correlation between health investment and health, that the health of wealthy and educated individuals declines more slowly and that they live longer, that current health status is a function of the initial level of health and the histories of prior health investments made, that health investment rapidly increases near the end of life and that length of life is finite as a result of limited life-time resources (the budget constraint). It derives a structural relation between health and health investment (e.g., medical care) that is suitable for empirical testing.

Suggested Citation

  • Titus Galama, 2011. "A Contribution to Health Capital Theory," Working Papers WR-831, RAND Corporation.
  • Handle: RePEc:ran:wpaper:wr-831
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    References listed on IDEAS

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    21. Galama, T. & Hullegie, P. & Meijer, E. & Outcault, S., 2012. "Empirical evidence for decreasing returns to scale in a health capital model," Health, Econometrics and Data Group (HEDG) Working Papers 12/05, HEDG, c/o Department of Economics, University of York.
    22. Titus Galama & Arie Kapteyn & Raquel Fonseca & Pierre‐Carl Michaud, 2013. "A Health Production Model With Endogenous Retirement," Health Economics, John Wiley & Sons, Ltd., vol. 22(8), pages 883-902, August.
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    26. Titus Galama & Arie Kapteyn & Raquel Fonseca Benito & Pierre-Carl Michaud, 2009. "Grossman's Health Threshold and Retirement," Working Papers WR-658, RAND Corporation.
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    Cited by:

    1. Hullegie, P.G.J., 2012. "Essays on health and labor economics," Other publications TiSEM dcc68fc9-7af1-4ba9-8f90-6, Tilburg University, School of Economics and Management.
    2. 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, September.
    3. Titus J. Galama & Patrick Hullegie & Erik Meijer & Sarah Outcault, 2012. "Is There Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model?," Health Economics, John Wiley & Sons, Ltd., vol. 21(9), pages 1080-1100, September.
    4. Bolin, Kristian & Lindgren, Björn, 2016. "Non-monotonic health behaviours – implications for individual health-related behaviour in a demand-for-health framework," Journal of Health Economics, Elsevier, vol. 50(C), pages 9-26.
    5. James J. Heckman, 2012. "The developmental origins of health," Health Economics, John Wiley & Sons, Ltd., vol. 21(1), pages 24-29, January.
    6. Annie Tubadji & Vassilis Angelis & Peter Nijkamp, 2016. "Endogenous intangible resources and their place in the institutional hierarchy," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 36(1), pages 1-28, February.
    7. repec:zbw:iamost:269539 is not listed on IDEAS
    8. Gabriella Conti & Giacomo Mason & Stavros Poupakis, 2019. "Developmental Origins of Health Inequality," Working Papers 2019-041, Human Capital and Economic Opportunity Working Group.
    9. Pilar Garcia-Gomez & Titus J. Galama & Eddy van Doorslaer & Angel Lopez-Nicolas, 2017. "Interactions Between Financial Incentives and Health in the Early Retirement Decision," Tinbergen Institute Discussion Papers 17-044/V, Tinbergen Institute.
    10. Titus J. Galama & Hans van Kippersluis, 2015. "A Theory of Education and Health," CINCH Working Paper Series 1503, Universitaet Duisburg-Essen, Competent in Competition and Health, revised Mar 2015.
    11. Bolin, Kristian & Caputo, Michael R., 2020. "Consumption and investment demand when health evolves stochastically," Journal of Economic Dynamics and Control, Elsevier, vol. 114(C).
    12. Bolin, Kristian & Lindgren, Björn, 2014. "Non-monotonic health behaviours - implications for individual health-related behaviour in a demand-for-health framework," Working Papers in Economics 588, University of Gothenburg, Department of Economics.
    13. 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.
    14. Titus J Galama & Hans van Kippersluis, 2019. "A Theory of Socio-economic Disparities in Health over the Life Cycle," Economic Journal, Royal Economic Society, vol. 129(617), pages 338-374.
    15. Harris, Matthew & Kohn, Jennifer, 2015. "Reference dependent utility from health and the demand for medical care," MPRA Paper 61926, University Library of Munich, Germany.
    16. 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).
    17. Iuliana Claudia Mihalache, 2019. "Health State of Human Capital in the Economic Theory," Postmodern Openings, Editura Lumen, Department of Economics, vol. 10(4), pages 182-192, December.
    18. Bolin, Kristian & Liljas, Bengt & Lindgren, Björn, 2014. "Individual technologies for health - the implications of distinguishing between the ability to produce health investments and the capacity to benefit from those investments," Working Papers in Economics 587, University of Gothenburg, Department of Economics.
    19. van Kippersluis, Hans & Galama, Titus J., 2014. "Wealth and health behavior: Testing the concept of a health cost," European Economic Review, Elsevier, vol. 72(C), pages 197-220.
    20. Rachel Griffith & Rodrigo Lluberas & Melanie Lührmann, 2016. "Gluttony and Sloth? Calories, Labor Market Activity and the Rise of Obesity," Journal of the European Economic Association, European Economic Association, vol. 14(6), pages 1253-1286.
    21. Edouard Ribes, 2022. "Financial planning & optimal retirement timing for physically intensive occupations," Working Papers hal-03219182, HAL.
    22. Titus J. Galama & Adriana Lleras-Muney & Hans van Kippersluis, 2018. "The Effect of Education on Health and Mortality: A Review of Experimental and Quasi-Experimental Evidence," NBER Working Papers 24225, National Bureau of Economic Research, Inc.
    23. Caputo, Michael R., 2021. "New insights in the canonical model of health capital," Mathematical Social Sciences, Elsevier, vol. 110(C), pages 23-33.
    24. Abdulkarim M. Meraya & Nilanjana Dwibedi & Xi Tan & Kim Innes & Sophie Mitra & Usha Sambamoorthi, 2018. "The dynamic relationships between economic status and health measures among working‐age adults in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 27(8), pages 1160-1174, August.

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    More about this item

    Keywords

    socioeconomic status; education; health; demand for health; health capital; medical care; life cycle; age; labor; mortality;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J00 - Labor and Demographic Economics - - General - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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