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Health, Welfare and Inequality

  • Gabriella Berloffa


    (University of Trento)

  • Agar Brugiavini


    (Department of Economics, University Of Venice Ca’ Foscari)

  • Dino Rizzi


    (Department of Economics, University of Venice Ca’ Foscari)

This paper uses data from the Health and Retirement Study (HRS) to study the relationship between health status and economic welfare at household level. We develop a model to estimate the welfare cost of ill health by exploiting the methodology of the equivalence scales. The crucial variables in this approach are, besides the health status (measured in several dimensions), the economic decisions of the household which can be directly related to health conditions, such as health-related expenses. By estimating a demand system we derive health-equivalence scales to learn about the cost of health conditions on economic welfare, controlling for other covariates. Our estimates suggest that – when taking account of health – the welfare of households in poor health drops substantially and inequality increases. There are important social welfare costs associated with differences in the health status of the elderly in the USA.

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Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2006_41.

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Length: 32 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:ven:wpaper:2006_41
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  1. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
  2. Jonathan Skinner & Weiping Zhou, 2004. "The Measurement and Evolution of Health Inequality: Evidence from the U.S. Medicare Population," NBER Working Papers 10842, National Bureau of Economic Research, Inc.
  3. Jérome Adda & James Banks & Hans-Martin von Gaudecker, 2007. "The Impact of Income Shocks on Health: Evidence from Cohort Data," MEA discussion paper series 07146, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  4. Le Grand, Julian, 1978. "The Distribution of Public Expenditure: The Case of Health Care," Economica, London School of Economics and Political Science, vol. 45(178), pages 125-42, May.
  5. Darius Lakdawalla & George Zanjani, 2002. "Insurance, Self-Protection, and the Economics of Terrorism," NBER Working Papers 9215, National Bureau of Economic Research, Inc.
  6. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1, December.
  7. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-97, June.
  8. Le Grand, Julian, 1991. "The distribution of health care revisited: A commentary on Wagstaff, van Doorslaer and Paci, and O'Donnell and Propper," Journal of Health Economics, Elsevier, vol. 10(2), pages 239-245, July.
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