the diffusion of health technologies cultural and biological divergence abstract this paper proposes the hypothesis that genetic distance to the health frontier influences population health outcomes evidence from a world sample suggests that genetic distance interpreted as long term cultural and biological divergence is an important factor in understanding health inequalities across countries specifically the paper documents a remarkably robust negative link between genetic distance to the united states and population health as measured by life expectancy at birth and the adult survival rate even after accounting for an extensive set of possible confounders such as gdp per capita and various climatic factors consistent with the interpretation that genetic distance is related to population health indirectly through human barriers to the diffusion of modern health technologies the evidence indicates that the gene gradient emerges at the onset of the international epidemiological transition

health care spending in the us vs uk the roles of medical education costs malpractice risk and defensive medicine abstract we analyze how two key factors contribute to the high cost of healthcare in the us relative to the uk i the higher private cost of medical education and ii the higher risk of malpractice litigation to assess the role of these factors we formulate calibrate and simulate an equilibrium model of physician wages and the supply of medical graduates work hours and treatment decisions of practicing physicians and malpractice risk and malpractice insurance pricing consistent with prior work we find direct costs of malpractice fines and insurance explain little of the high cost of healthcare in the us however the high private cost of medical education interacts with high malpractice risk in an interesting way it leads doctors to i demand high wages and ii use excessive diagnostics to mitigate risk defensive medicine the agency problem that arises because patients cannot judge the efficacy of tests allows them to be over prescribed together these factors increase costs far more than direct malpractice costs specifically physician salaries plus diagnostic tests comprise 4 04 of gdp in the us compared to only 2 3 in the uk the mechanisms emphasized in our model can largely explain the difference our policy simulations imply that more generous medical education subsidies would lead to both improved patient welfare and reduced overall health care costs in the us system a pareto improvement we also find policies to i reduce malpractice risk or ii induce doctors to internalize a small part of diagnostic costs would have similar efficacious effects

ageing health and health care the population in the developed world has experienced a significant increase in life expectancy over the last 50 years simultaneously while the onset of comorbidities has been deferred to older age groups health care expenditure has grown dramatically primarily owing to the advancement of medical technology and the expansion of individual income levels along with population ageing in the wake of increased longevity however the contribution of population ageing to health expenditure growth is subject to some theoretical and empirical scrutiny this paper takes the question of ageing and health and health care to the data to evaluate the net impact of ageing we focus on two main questions namely the welfare valuation of longevity improvements for various oecd countries along with the red herring hypothesis which suggests that population ageing has a small and almost negligible impact on health care expenditure our estimates lead us to suggest an average gain in longevity of 4 5 years since 1980 corresponding to about 13 5 per cent of lifetime income of a 20 year old in 2000 furthermore we confirm a weak red herring claim that is that population ageing accounts for only a 0 5 per cent annual growth rate of health care expenditure finally we find that the rise in longevity leads to a further demand for life prolonging medical care

differential mortality and the progressivity of social security abstract there is a well established negative correlation between earnings and mortality risk using a calibrated general equilibrium macroeconomic model this paper examines how this correlation interacts with the welfare implications of social security s benefit earnings rule my primary findings suggest that the welfare ranking of alternative benefit earnings rules is somewhat sensitive to differential mortality due to their relatively high mortality risk households with unfavorable earnings histories heavily discount the expected utility from old age consumption and therefore do not put much weight on better work retirement consumption smoothing because of this reason social security s benefit earnings rule warrants less redistribution in the presence of differential mortality compared to when mortality risk is uncorrelated to earnings i find that this result continues to hold when household level labor supply distortions are ignored and also when an alternative maximin welfare criterion is considered but not when accidental bequests from the deceased are redistributed to the survivors

the quantity and quality of life and the evolution of world inequality gdp per capita is usually used to proxy for the quality of life of individuals living in different countries welfare is also affected by quantity of life however as represented by longevity this paper incorporates longevity into an overall assessment of the evolution of cross country inequality and shows that it is quantitatively important the absence of reduction in cross country inequality up to the 1990s documented in previous work is in stark contrast to the reduction in inequality after incorporating gains in longevity throughout the post world war ii period health contributed to reduce significantly welfare inequality across countries this paper derives valuation formulas for infra marginal changes in longevity and computes a full growth rate that incorporates the gains in health experienced by 96 countries for the period between 1960 and 2000 incorporating longevity gains changes traditional results countries starting with lower income tended to grow faster than countries starting with higher income we estimate an average yearly growth in full income of 4 1 percent for the poorest 50 percent of countries in 1960 of which 1 7 percentage points are due to health as opposed to a growth of 2 6 percent for the richest 50 percent of countries of which only 0 4 percentage points are due to health additionally we decompose changes in life expectancy into changes attributable to 13 broad groups of causes of death and three age groups we show that mortality from infectious respiratory and digestive diseases congenital perinatal and ill defined conditions mostly concentrated before age 20 and between ages 20 and 50 is responsible for most of the reduction in life expectancy inequality at the same time the recent effect of aids together with reductions in mortality after age 50 due to nervous system senses organs heart and circulatory diseases contributed to increase health inequality across countries

optimal retirement with increasing longevity we develop an optimizing life cycle model of retirement with perfect capital markets we show that longer healthy life expectancy usually leads to later retirement but with an elasticity less than unity we calibrate our model using data from the us and find that over the last century the effect of rising incomes which promote early retirement has dominated the effect of rising lifespans our model predicts continuing declines in the optimal retirement age despite rising life expectancy provided the rate of real wage growth remains as high as in the last century

recognizing progeny in the value of life abstract this note generalizes the value of life to incorporate the preferences for descendants of a dynastically altruistic decision maker it derives the value of progeny and shows how it depends on the benthamite vs millian nature of dynastic altruism

wealth and health behavior testing the concept of a health cost wealthier individuals engage in healthier behavior this paper seeks to explain this phenomenon by exploiting both inheritances and lottery winnings to test a theory of health behavior we distinguish between the direct monetary cost and the indirect health cost value of health lost of unhealthy consumption the health cost increases with wealth and the degree of unhealthiness leading wealthier individuals to consume more healthy and moderately unhealthy but fewer severely unhealthy goods the empirical evidence presented suggests that differences in health costs may indeed partially explain behavioral differences and ultimately health outcomes between wealth groups

negligible senescence an economic life cycle model for the future abstract we propose a model of aging and health deficit accumulation model with an infinite time horizon and a steady state of constant health the time of death is uncertain and endogenous to lifestyle and health behavior this setup can be conceptualized as a strive for immortality that is never reached we discuss adjustment dynamics and show that the new setup is particularly useful to understand aging of the oldest old i e of individuals for which morbidity and mortality have reached a plateau we then show how the existence of a steady state can be used to perform comparative dynamics exercises analytically as an illustration we investigate the effects of more expensive health investment and of advances in medical technology on optimal short run and long run health behavior

public health spending tax reform and long run growth abstract public health spending is introduced into an endogenous growth model to examine the effect of a tax reform on the growth and learning time unlike previous studies the calibrated model produces an increase in the learning time consistent with the us data

life cycle responses to health insurance status this paper studies the lifetime effects of exogenous changes in health insurance coverage e g medicare ppaca termination of employer provided plans on the dynamic optimal allocation consumption leisure health expenditures status health and wealth and welfare we solve simulate and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks and exogenous health insurance by varying coverage we identify the marginal effects of insurance when young and or when old on allocations statuses and welfare our results highlight positive effects of insurance on health wealth and welfare as well as mid life substitution away from healthy leisure in favor of more health expenses caused by peaking wages and accelerating health issues

a model of the demand for longevity and the value of life extension we specify a demand function for longevity or quantity of life along with corresponding demand functions for indicators of quality of life and a value of health and life extension function we show that the demand for health must be derived in conjunction with that for longevity and the related consumption plan and that all choices depend on initial individual endowments and terminal conditions our comparative dynamics predictions indicate that optimal health and longevity are increasing functions of endowed wealth rather than necessarily current income that improvements in opportunities to produce health can accentuate the differences between endowed health and attained longevity levels and that the value individuals ascribe to their health may be increasing over a good portion of their life cycle we use this model to analyze observed empirical variations in levels and trends of life expectancy and in exposure to health risks across different population groups

complementarity and the measurement of individual risk tradeoffs accounting for quantity and quality of life effects this paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk we derive a relationship between the value of a statistical life vsl and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship our empirical analysis finds that variations in an individual s health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage risk tradeoffs we describe how extensions to the specification of hedonic wage models including measures for quality of life and anticipated longevity threats help to explain the diversity in past studies examining how the estimated wage risk tradeoff changes with age

the determinants of mortality mortality rates have fallen dramatically over time starting in a few countries in the 18th century and continuing to fall today in just the past century life expectancy has increased by over 30 years at the same time mortality rates remain much higher in poor countries with a difference in life expectancy between rich and poor countries of also about 30 years this difference persists despite the remarkable progress in health improvement in the last half century at least until the hiv aids pandemic in both the time series and the cross section data there is a strong correlation between income per capita and mortality rates a correlation that also exists within countries where richer better educated people live longer we review the determinants of these patterns over history over countries and across groups within countries while there is no consensus about the causal mechanisms we tentatively identify the application of scientific advance and technical progress some of which is induced by income and facilitated by education as the ultimate determinant of health such an explanation allows a consistent interpretation of the historical cross country and within country evidence we downplay direct causal mechanisms running from income to health

optimal choice of health and retirement in a life cycle model abstract we examine within a life cycle model the simultaneous choice of health care and retirement together with consumption health tends to have an impact on retirement through morbidity determining earnings and the disutility of work and through longevity determining the need to accumulate retirement wealth conversely the age of retirement drives the demand for health care through the value of survival and the value of morbidity reductions we characterise the optimal relationship between health expenditure and retirement and apply our model to analyse the effects of moral hazard in the annuity market while moral hazard always induces excessive health investments and an excessive duration of working life it also triggers an excessive level of consumption if the impact of health on the disutility of work is sufficiently large we examine a transfer scheme and mandatory retirement as policies towards curtailing moral hazard numerical analysis illustrates the role of moral hazard in shaping the life cycle allocation

spring cleaning rural water impacts valuation and property rights institutions the brief summarizes the spring cleaning rural water impacts valuation and property rights institutions the first two rounds of spring protection occurred in january april 2005 and august november 2005 the author measure health impacts of spring protection an investment that improves source water quality the author also estimate households valuation of spring protection and simulate the welfare impacts of alternatives to the current system of common property rights in water which limits incentives for private investment spring infrastructure investments reduce fecal contamination by 66 percent but household water quality improves less due to recontamination child diarrhea falls by one quarter travel cost based revealed preference estimates of households valuations are much smaller than both stated preference valuations and health planners valuations and are consistent with models in which the demand for health is highly income elastic the author estimate that private property norms would generate little additional investment while imposing large static costs due to above marginal cost pricing private property will function better at higher income levels or underwater scarcity and alternative institutions could yield pareto improvements

migration and sovereign default risk abstract during sovereign debt crises countries experience persistent economic declines spiking spreads and outflows of capital and workers to account for these salient features we develop a sovereign default model with migration and capital accumulation the model has a two way feedback default risk lowers workers welfare and induces emigration which in turn intensifies default risk by lowering tax base and investment compared with a no migration model our model produces higher default risk lower investment and a more profound and prolonged recession we find that migration accounts for almost all of the lack of recovery in gdp during the recent spanish debt crisis

ageing government budgets retirement and growth we analyze the short and long run effects of demographic ageing increased longevity and reduced fertility on per capita growth the olg model captures direct effects working through adjustments in the savings rate labor supply and capital deepening and indirect effects working through changes of taxes government spending components and the retirement age in politico economic equilibrium growth is driven by capital accumulation and productivity increases fueled by public investment the closed form solutions of the model predict taxation and the retirement age in oecd economies to increase in response to demographic ageing and per capita growth to accelerate if the retirement age were held constant the growth rate in politico economic equilibrium would essentially remain unchanged due to a surge of social security transfers and crowding out of public investment

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

dynamic inefficiencies in an employment based health insurance system theory and evidence we investigate the effects of the institutional settings of the us health care system on individuals life cycle medical expenditures health is a form of general human capital labor turnover and labor market frictions prevent an employer employee pair from capturing the entire surplus from investment in an employee s health thus the pair underinvests in health during working years thereby increasing medical expenditures during retirement we provide empirical evidence consistent with the comparative statics predictions of our model using the medical expenditure panel survey meps and the health and retirement study hrs our estimates suggest significant inefficiencies in health investment in the united states

technology diffusion and productivity growth in health care we draw on macroeconomic models of diffusion and productivity to explain empirical patterns of survival gains in heart attacks using medicare data for 2 8 million patients during 1986 2004 we find that hospitals rapidly adopting cost effective innovations such as beta blockers aspirin and reperfusion had substantially better outcomes for their patients holding technology adoption constant the marginal returns to spending were relatively modest hospitals increasing the pace of technology diffusion tigers experienced triple the survival gains compared to those with diminished rates tortoises in sum small differences in the propensity to adopt effective technology lead to wide productivity differences across hospitals

public private mix of health expenditure a political economy and quantitative analysis this paper constructs a simple model to examine decisions on public and private health spending under majority voting in the model agents with heterogeneous incomes choose how much to consume and spend on health care and vote for public health expenditure the health status of an agent is determined by a ces composite of public and private health expenditure the existence and uniqueness of the voting equilibrium are established a quantitative exercise reveals the importance of the relative effectiveness of public and private health expenditure and their substitutability in determining the public private mix of health expenditure and in accounting for the observed differences across a sample of 22 advanced democratic countries

climate and the emergence of global income differences the latitude gradient in comparative development is a striking fact as one moves away from the equator economic activity rises while this regularity is well known it is not well understood in the present paper we take a step towards unpacking this gradient perhaps the strongest correlate with absolute latitude is the intensity of ultraviolet radiation uv r which epidemiological research has shown to be a cause of a wide range of diseases we establish that uv r is strongly and negatively correlated with economic activity both across and within countries we propose and test a mechanism that links uv r to current income differences via the impact of disease ecology on the timing of the take off to sustained growth

the role of asset testing in public health insurance reform abstract starting slowly with the 1996 welfare reform act and culminating in the 2010 affordable care act means tested public health insurance eligibility expanded to include adults in low income families regardless of their asset holdings this paper quantifies the effects of these eligibility expansions within the context of the 2010 affordable care act i construct a dynamic stochastic general equilibrium model with indivisible labor supply expanded to include an endogenous household choice of health insurance coverage and calibrate it to u s data i establish that changes in the distribution of labor and welfare associated with removal of asset testing are driven by exit of high productivity and high wealth households from the labor market i then expand my analysis to the 2010 affordable care act to demonstrate that removal of asset testing is critical to the obtained results even when combined with other provisions of the act finally i find that a simple asset test for eligibility of health insurance transfers undoes the distortion to the household labor supply decision among high productivity types these results are robust to the introduction of employer premium contributions an independent health insurance market and idiosyncratic shocks to eligibility for employment based health insurance

are medical prices declining evidence from heart attack treatments we address long standing problems in measuring medical inflation by estimating two types of price indices the first a service price index prices specific medical services as does the current cpi the second a cost of living index measures a quality adjusted cost of treating a health problem we apply these indices to heart attack treatment between 1983 and 1994 more frequent reweighting and accounting for price discounts lowers the measured price change for heart attacks by three percentage points annually accounting for quality change lowers it further we estimate that the real cost of living index fell about 1 percent annually

risk aversion and the value of life we show that state non separable preferences a la epstein zin weil ezw provide a tractable and flexible framework to study the economics of health and longevity this utility representation 1 admits a preference for timing of resolution of uncertainty regarding mortality risks 2 links the marginal valuation of survival to the level of survival 3 can preserve homotheticity even for low degrees of intertemporal substitution without generating implausible predictions regarding the value of life and 4 adds needed flexibility to account for the empirical evidence on the value of life we illustrate the implications of ezw preferences for the economic value of observed differences in life expectancy across countries and over time and for the value of life over the life cycle

the impact of competition on management quality evidence from public hospitals in this paper we examine the causal impact of competition on management quality we analyze the hospital sector where geographic proximity is a key determinant of competition and english public hospitals where political competition can be used to construct instrumental variables for market structure since almost all major english hospitals are government run closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment we find that management quality measured using a new survey tool is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions ami more importantly we find that higher competition as indicated by a greater number of neighboring hospitals is positively correlated with increased management quality and this relationship strengthens when we instrument the number of local hospitals with local political competition adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10 7 reduction in heart attack mortality rates

projecting long term medical spending growth we present a dynamic general equilibrium model of the u s economy and the medical sector in which the adoption of new medical treatments is endogenous and the demand for medical services is conditional on the state of technology we use this model to prepare 75 year medical spending forecasts and a projection of the medicare actuarial balance and we compare our results to those obtained from a method that has been used by government actuaries our baseline forecast predicts slower health spending growth in the long run and a lower medicare actuarial deficit relative to the previous projection methodology

measuring the value of a statistical life problems and prospects tradeoffs between monetary wealth and fatal safety risks are summarized in the value of a statistical life vsl a measure that is widely used for the evaluation of public policies in medicine the environment and transportation safety this paper demonstrates the widespread use of this concept and summarizes the major issues both theoretical and empirical that must be confronted in order to provide a credible estimate of a vsl the paper concludes with an application of these issues to a particular study of speed limits and highway safety

private equity investment decisions in family firms the role of human resources and agency costs abstract this study examines decision making criteria that are employed by private equity pe investors selecting family firms hypotheses test the likelihood of investment based on family firm characteristics findings show that pe professionals take into account family specific criteria including human resources and opportunities to reduce agency costs furthermore pe professionals prefer family firms that are already professionalized this research contributes to the family firm literature on both a theoretical and a methodological level exploring nonfamily succession routes and employing techniques conjoint analysis for data collection and multilevel models for data analysis that have seldom been used in this context

disentangling the heterogeneous income elasticity and dynamics of health expenditure in this article we empirically study the impact of per capita income on health care expenditure and its dynamics over time in a sample of 14 oecd countries for the period 1971 to 2009 a simple model built upon one developed by newhouse 1977 suggests that health care is a necessity in the short run but it cannot be rejected to be a luxury good in the long run our findings provide strong empirical evidence that a year s health expenditure is conditioned by the previous one interestingly our results reveal increasing income inelasticity over time along with huge heterogeneity across countries finally this article supports the hypothesis of conditional convergence in health care spending among countries in designing policies which facilitate the sustainability of national health systems we emphasize that ceteris paribus the greater the participation of public health the lower the growth rate of health spending high share of children and elderly over working age population opposite influences w

health spending and public pension evidence from panel data abstractthis article empirically investigates the determinants of aggregate health expenditure in a panel of oecd countries from 1980 to 2005 we differ from most existing studies by testing some new determinants motivated by recent theoretical advances in the literature we find that a one percentage increase in public pension payments per elderly person leads to approximately a one third percentage increase in aggregate health spending and this effect is significant and robust across a variety of model specifications a back of the envelope calculation based on this estimate suggests that the expansion of the public pension programme on average accounts for approximately over one fifth of the rise in aggregate health expenditure as a share of gdp in the set of oecd countries during 1980 2005 in addition we find that the estimated effect of gdp per capita in our model ranges from 0 66 to 0 80 which is consistent with the results from some recent studies and thus further reinforces the finding in the

growth and welfare under endogenous lifetime we study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with the realistic feature that households savings are held in annuities we characterize healthcare spending in the decentralized market equilibrium and its effects on economic growth we then identify the moral hazard effect in healthcare investments when annuity rates are conditioned on average mortality and explain the conditions under which it will lead to over investment in healthcare moreover we specify the general equilibrium effects and macroeconomic repercussions associated with this moral hazard effect calibrating our model to oecd data we find that the moral hazard effect may be substantial and implies sizeable welfare losses of approximately 1 5 at a more general level our study suggests that welfare improvements from longevity increases may be quite lower than sometimes assumed when considered in planner economies

growth technological change and ict diffusion recent evidence from oecd countries in this paper we present an overview of gdp and productivity growth patterns in oecd countries over the past decade on the basis of harmonized data our evidence suggests that fast growing countries generally shared three characteristics improvements in labour utilization a generalized enhancement in human capital and rapid shifts in the composition of physical capital towards information and communication technology ict equipment particularly we show that technological change embodied in new ict capital goods has been a primary source of output and productivity growth in ict using sectors the international comparison allows relating growth patterns to institutional and policy indicators thereby offering some preliminary insights into the potential sources of growth disparities cross country evidence yields some tentative support to the idea that institutional factors affecting competition in the product market are likely to affect productivity patterns especially in a period of rapid diffusion of a general purpose technology such as ict copyright 2002 oxford university press

aspirations health and the cost of inequality how does inequality motivate people and at what cost in a model of perpetual youth people have heterogeneous upward looking aspirations they value their consumption relative to the conditional mean of those above them in the distribution their survival depends on health capital produced from time investment and health goods higher fundamental inequality working through the aspirations gap motivates people to work and save more economic outcomes improve but income and consumption inequality worsen because the poor have less capacity to respond on the labor market by diverting resources from health production aspirations also worsen mortality especially for the poor though relative income has a strong negative effect on personal health inequality has a weak effect on population health explaining an empirical puzzle on the relative income and health gradient

using mandated speed limits to measure the value of a statistical life in 1987 the federal government permitted states to raise the speed limit on their rural interstate roads but not on their urban interstate roads from 55 mph to 65 mph since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred this institutional change provides an opportunity to estimate an upper bound on the public s willingness to trade off wealth for a change in the probability of death our estimates indicate that the adoption of the 65 mph limit increased speeds by approximately 4 percent or 2 5 mph and fatality rates by roughly 35 percent together the estimates suggest that about 125 000 hours were saved per lost life when the time saved is valued at the average hourly wage the estimates imply that adopting states were willing to accept risks that resulted in a savings of 1 54 million 1997 dollars per fatality with a sampling error roughly one third this value we set out a simple model of states decisions to adop

the value of life and the rise in health spending over the past half century americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result debate on health policy often focuses on limiting the growth of health spending we investigate an issue central to this debate is the growth of health spending a rational response to changing economic conditions notably the growth of income per person we develop a model based on standard economic assumptions and argue that this is indeed the case standard preferences of the kind used widely in economics to study consumption asset pricing and labor supply imply that health spending is a superior good with an income elasticity well above one as people get richer and consumption rises the marginal utility of consumption falls rapidly spending on health to extend life allows individuals to purchase additional periods of utility the marginal utility of life extension does not decline as a result the optimal composition of total spending shifts toward health and the health share grows along with income in projections based on the quantitative analysis of our model the optimal health share of spending seems likely to exceed 30 percent by the middle of the century

longevity complementarities under competing risks many of the high expenditure health programs established by international organizations or national and subnational governments involve disease specific interventions such as measles vaccinations hiv education programs mammogram screening malaria prevention and lung cancer research typically these programs are evaluated solely upon the success or failure of their impact on the targeted disease this paper argues that such an exclusive evaluation may significantly underestimate the overall effect of disease specific interventions when multiple risks act as competing forces on life we suggest that programs that target one disease may have important spillover effects on the mortality and morbidity of other causes of death in order to better understand and evaluate the overall effects of disease specific programs it is necessary to understand and measure these spillover effects this paper provides a theoretical and empirical analysis of the incentives introduced by disease specific mortality interventions more precisely we discuss predictions about health investment incentives as implied by the competing risk model which is the empirical framework almost exclusively used to study multiple cause mortality we show that important complementary effects between niultiple causes of death operate to equalize the occurrence of the causes we argue that this complementarity should alter the evaluation of cause specific interventions by discrediting the argument that interventions are wasted because competing mortality risks are just around the corner in support of the existence of such complementarities we present substantive evidence from one of the most important public health programs ever introduced in developing countries the expanded programme on immunization epi of the united nations the paper is organized as follows section i provides a theoretical analysis arguing that the competing risk model of multiple causes of mortality corresponds to the leontief production function of survival this implies that there are inherent complementarities between investments in the prevention of cause specific mortality risks both on the individual level and on the aggregate level for competing risks the marginal benefit of investing to avoid one cause of death increases as a function of the survival rates of other causes the implications of this complementarity are important and have not received sufficient attention in theoretical or practical evaluations of causespecific interventions when mortality is treated as exogenous a disease specific intervention may seem wasteful if members of the targeted group are likely to die from a second cause as soon as the first has been eliminated then reducing the mortality from one cause of death would not appear to substantially increase life expectancy indeed this argument is repeatedly made by economists and demographers about medical care interventions in old age however it is sguided to use the preintervention background mortality when assessing the effectiveness of an interventionbehavior under one policy should not be assumed to prevail under a new policy as the leontief nature of competing risks predicts health investments will be focused upon he most immediate cause of death so that there are dow department of health policy and administration cb 7400 university of north carolina chapel hill nc 27599 philipson irving b harris graduate school of public policy studies department of economics and the law school university of chicago 1155 east 60th street chicago il 60637 sala i martin department of econornics columbia university 420 west 118th street 1005 new york ny 10027 and universitat pompeu fabra we are thankful to three anonymous referees for comments that substantially improved the paper and we especially acknowledge the contributions of jessica holmes who was a research assistant and co author on early drafts of this work we also thank gary becker kate howe steen jorgenson casey mulligan sherwin rosen paul schultz and participants at numerous workshops for discussions dow acknowledges financial support from national institute on aging grant no t32 ag00244 philipson from the national science foundation and the rockefeller foundation this research was begun while all authors were at yale university during 1994

survival versus consumption we develop an indirect method to estimate utility and willingness to pay wtp for reductions in the risk of death at various ages using a life cycle model of consumption we assume that an individual sets his consumption level each year so as to maximize his expected lifetime utility alternative assumptions about opportunities for borrowing and annuities characterize two polar types of societies in our robinson crusoe case an individual must be entirely self sufficient and annuities are not available in our perfect markets case an individual can borrow against future earnings and purchase actuarially fair annuities we show that under these assumptions wtp is the sum of livelihood discounted expected future earnings and consumer surplus to illustrate our methods we derive wtp for an average financially independent american man under plausible assumptions the model is calibrated to 1978 earnings e g 18 000 per year for men aged 45 54 with at least some income in the robinson crusoe case wtp increases from 500 000 at age 20 to a peak of 1 250 000 at age 40 and declines to 630 000 at age 60 in the perfect markets case age variations are less pronounced wtp is 1 050 000 at age 20 peaks at 1 070 000 at age 25 and declines to 600 000 at age 60 these results suggest that individuals value risks to their lives at several times the pro rata share of their future earnings

reference health and the demand for medical care we propose that health in prior periods termed reference health is theoretically and empirically relevant to the demand for medical care to address non normality in the distributions of medical care spending consumption and health we use a conditional density estimator nested in a finite mixture framework we find that reference health can help explain the variation in spending among individuals with the same contemporaneous health particularly in the top tail of the spending distribution we demonstrate that omitting reference health understates the potential cost savings of healthy aging initiatives by 50 percent this article is protected by copyright all rights reserved

u s war costs two parts temporary one part permanent military spending fatalities and the destruction of capital all of which are immediately felt and are often large are the most overt costs of war they are also relatively short lived but the costs of war borne by combatants and their caretakers which includes families communities and the modern welfare state tend instead to be lifelong in this paper i show that a significant component of the budgetary costs associated with u s wars is long lived one third to one half of the total present value of historical war costs are benefits distributed over the remaining life spans of veterans and their dependents even thirty years after the end of hostilities typically half of all benefits remain to be paid estimates of the costs of injuries and deaths suggest that the private burden of war borne by survivors namely the uncompensated costs of service related injuries are also large and long lived

measuring and modeling intergenerational links in relation to long term care long term care has profound intergenerational implications it can be costly for those who need it and onerous for loved ones who provide it we pinpoint three intergenerational aspects of long term care that require further research one concerns the link between costs of private care and intergenerational wealth transfers the second concerns the link between participation in care and the work and welfare of family providers the third relates to intergenerational tensions that these and other late in life interactions create we outline innovations in modeling and measurement that would improve understanding of intergenerational linkages and their implementation in appropriate panel data jel d91 i13 j22

the impact of nearly universal insurance coverage on health care utilization evidence from medicare the onset of medicare eligibility at age 65 leads to sharp changes in the health insurance coverage of the u s population these changes lead to increases in the use of medical services with a pattern of gains across socioeconomic groups that varies by type of service while routine doctor visits increase more for groups that previously lacked insurance hospital admissions for relatively expensive procedures like bypass surgery and joint replacement increase more for previously insured groups that are more likely to have supplementary coverage after 65 reflecting the relative generosity of their combined insurance package under medicare