slides4 - Grossmans Model Model Equation Model Predictions...

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Unformatted text preview: Grossmans Model Model Equation Model Predictions Demand for health and health care Angela Fertig Spring 2010 Angela Fertig Demand for health and health care Grossmans Model Model Equation Model Predictions Health is an investment I Buy commodities and transform them into better health (derived demand for health) I spend time improving health I medical care I You gain from improving your health I it increases productivity (work more, harder = less sick leave, higher wage) investment good (house) I it makes you feel better consumption good (car) I Health is built up slowly and health erodes over time (depreciates) Angela Fertig Demand for health and health care Grossmans Model Model Equation Model Predictions How to choose how much health I What is the cost to install a further unit of health? I commodities bought I time spent, evaluated at wage rate I What is the benefit of a further unit of health? I value of time saved, evaluated at wage rate Angela Fertig Demand for health and health care Grossmans Model Model Equation Model Predictions Equilibrium Yield of health investment should equal yield of financial asset (adjusting for the fact that health depreciates): wage X time saved by extra unit health capital cost of extra unit of health capital = r + r = mkt interest rate you could get on a financial investment...
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This note was uploaded on 01/18/2012 for the course HPAM 8600 taught by Professor Ferig during the Spring '11 term at University of Georgia Athens.

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slides4 - Grossmans Model Model Equation Model Predictions...

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