slides2 - Production Function of Health Grossmans Model...

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Unformatted text preview: Production Function of Health Grossmans Model Labor-Leisure Diagram Model Equation Model Predictions Demand for health and health care Angela Fertig Angela Fertig Demand for health and health care Production Function of Health Grossmans Model Labor-Leisure Diagram Model Equation Model Predictions Production Function of Health Last time, we discussed our first economic model when we talked about the determinants of health. I A production function is a relationship between inputs and outputs I We make 2 assumptions about production functions: I more input means more output (positive relationship) I diminishing marginal product (bowed shape) I The flat of the curve diagram is a production function of health where there was one input (health spending) and one output (health). I We discussed other possible inputs: biology, behavior, environment, social, and health care. Angela Fertig Demand for health and health care Production Function of Health Grossmans Model Labor-Leisure Diagram Model Equation Model Predictions What evidence do we have? It is very difficult to estimate the production function because: 1. Health can be measured in many ways: I mortality rate : accurate but doesnt capture pain & suffering I morbidity (illness) rates : have to go to doctor to know that you are sick I disability days : only observed if you work I self-reported health status : what does this really capture? 2. It is difficult to eliminate bias from the estimates: I Estimated effect of health care on health is subject to selection bias : people who get a lot of health care tend to be sicker than those who dont need to go to the doctor I Estimated effect of income on health is subject to reverse causality : could be that sick people cant work much so poor Angela Fertig Demand for health and health care Production Function of Health Grossmans Model Labor-Leisure Diagram Model Equation Model Predictions 3 methods for dealing with bias 1. Fixed Effects : use multiple observations on a person/family and look for differences in behavior/outcomes I Mom has multiple babies, smoked during one pregnancy, did outcomes change? 2. Difference in Differences : use variation across states and time I MA insurance change, CT no change, look at increased insurance effect on health pre and post 3. Instrumental Variables : estimate effect due to exogenous change I Random schools have anti-smoking counseling, what is effect of smoking for smoker who would not smoke if had counseling? Angela Fertig Demand for health and health care Production Function of Health Grossmans Model Labor-Leisure Diagram Model Equation Model Predictions Evidence on production function of health I Biology : Children of mothers who were pregnant during the 1918 Flu Pandemic compared to those born a few months before are 20% more likely to be disabled (Almond 2006)....
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slides2 - Production Function of Health Grossmans Model...

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