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slides3 - Grossman's Model Labor-Leisure Model How is...

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Grossman’s Model Labor-Leisure Model How is health an investment? Demand for health and health care Angela Fertig Spring 2010 Angela Fertig Demand for health and health care
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Grossman’s Model Labor-Leisure Model How is health an investment? Grossman’s Model Based on human capital theory – people invest in education and health like a firm invests in capital equipment I People demand health for 2 reasons: I it increases productivity (work more, harder) – investment good (house) I it makes you feel better – consumption good (car) I 2 ways to get health: I spend time improving health I medical care I Education makes it easier to get health I Health depreciates over time Angela Fertig Demand for health and health care
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Grossman’s Model Labor-Leisure Model How is health an investment? Plan I Learn labor-leisure model to show how health is an investment (today) I Learn Grossman model main equation to show how to choose optimal health (tomorrow) I Use Grossman model equation to discuss model predictions Angela Fertig Demand for health and health care
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