The Human Capital Model of the Demand for Health / Michael Grossman.

Format:

Book

Author/Creator:

Grossman, Michael.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7078.

NBER working paper series no. w7078

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

This paper contains a detailed treatment of the human capital model of the demand for health. Theoretical predictions are discussed, and theoretical extensions are reviewed. Empirical research that tests the predictions of the model or studies causality between years of formal schooling completed and good health is surveyed. The model views health as a durable capital stock that yields an output of healthy time. Individuals inherit an initial amount of this stock that depreciates with age and can be increased by investment. The household production function model of consumer behavior is employed to account for the gap between health as an output and medical care as one of many inputs into its production. In this framework the shadow price' of health depends on many variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education if more educated people are more efficient producers of health. An important result is that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded.

Notes:

Print version record

April 1999.