The Health Production Function

1
The Health Production Function

• Health is a function of
• health care
• lifestyle
• environment
• genes
• Our focus is on the effect of health care, but
  its effect may be smaller than the others
• Ceteris paribus pound

2
Total and Marginal Product
Health
Total Product
64
63
59
7
52
12
40
Health care
0
1
2
4
6
8
Health
12
7
Marginal Product
Health care
1
1
2
4
6
8
3
Health Care and Population Explosions

• What causes population explosions?
• Death rate falls?
• Birth rate rises?
• Both death and birth rates start off very high
• Then the death rate falls dramatically while the
  birth rate stays high
• Eventually, birth rate falls to match death rate

4
(No Transcript)
5
(No Transcript)
6
What Causes Death Rates to Fall?

• Not health care!
• Medical treatments not developed until after
  decline in mortality from specific diseases
• Environmental and lifestyle changes
• public health
• nutrition

7
Some Case Studies
See Fig. 4-3, p. 79, Folland, Goodman, and Stano
8
Back to the Present -- Estimating Health
Production

• Problems
• how to measure health
• estimation biases

9

• Early estimation of health effects
• zero marginal product of health care
• marginal product of education positive
• ditto smoking reduction
• so reduce health care, increase education and
  quit smoking programs

10
Recent Work

• Positive marginal product of health expenditures
• Importance of controlling for lifestyle effects
• Importance of controlling for population
  characteristics
• sex, age, race

11
Fuchss Study of Lifestyle Effects

• Comparison of matched states
• alternative to regression analysis
• Utah vs. Nevada
• similar in terms of health-care spending
• generally healthier lifestyle in Utah
• Better health in Utah

12
Studies Using Other Aggregate Measures of Health
Status

• Neonatal mortality
• Non-mortality studies
• Newhouse and Friedlander (1980)
• low marginal product of health care

13

• The Rand Health Insurance Experiments
• Newhouse, et al (1993)
• low marginal product
• Valdez et al (1985)
• low marginal product

14
The Role of Schooling

• Does more education really cause better health?
• time discounting
• no
• education makes people more efficient
  own-producers of health
• yes

15

• Empirical studies
• Berger and Leigh (1989)
• Behrman and Wolfe (1989) and Wolfe and Behrman
  (1987)
• contradictory results using different methods to
  control for other factors
• Balance of evidence in favor of causation