Empirical Evidence for Decreasing Returns to Scale in a Health Capital Model

Galama, T. J.; Hullegie, Patrick; Meijer, Erik; Outcault, Sarah

doi:10.2139/ssrn.2064569

Cited by 5 publications

(6 citation statements)

References 48 publications

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“…We are convinced that there are at least two reasons why we should not expect decreasing returns in our estimates. First of all, the more recent literature (Galama, Hullegie, Meijer, & Outcault, 2012) has been quite critical with respect to the capacity of obtaining estimates coherent with decreasing returns when estimating a demand function derived from a Grossman-like model. In particular, Galama et al (2012) highlight that the decreasing returns to scale is a strong assumption used by Grossman because of its theoretically desirable features.…”

Section: Resultsmentioning

confidence: 99%

“…First of all, the more recent literature (Galama, Hullegie, Meijer, & Outcault, 2012) has been quite critical with respect to the capacity of obtaining estimates coherent with decreasing returns when estimating a demand function derived from a Grossman-like model. In particular, Galama et al (2012) highlight that the decreasing returns to scale is a strong assumption used by Grossman because of its theoretically desirable features. Empirically, once they control for the endogeneity of health, the results point toward constant return to scale, thus questioning the robustness of prior estimates in this literature.…”

Section: Resultsmentioning

confidence: 99%

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Drug therapy adherence and health outcomes in the presence of physician and patient unobserved heterogeneity

2017

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Understanding the role that drug adherence has on health outcomes in everyday clinical practice is central for the policy maker. This is particularly true when patients suffer from asymptomatic chronic conditions (e.g., hypertension, hypercholesterolaemia, and diabetes). By exploiting a unique longitudinal dataset at patient and physician level in Italy, we show that patients and physicians unobserved characteristics play an important role in determining health status, at least as important as drug adherence. Most importantly, we find that both adherence and prescribed treatment regimen effects are highly heterogeneous across physicians, highlighting their crucial role in shaping patients' health status.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Drug therapy adherence and health outcomes in the presence of physician and patient unobserved heterogeneity

2017

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“…However, we are not aware of any precise estimates for parameters φ j and ξ in expression (1) . A recent empirical contribution by Galama et al (2012) finds weak evidence for decreasing returns to scale which would imply that ξ < 0. In our paper we allow φ j to be age-dependent and calibrate ξ and φ j together to match aggregate health expenditures and the medical expenditure profile over age.…”

Section: Health Capitalmentioning

confidence: 98%

Market inefficiency, insurance mandate and welfare: U.S. health care reform 2010

Jung

Tran

2016

Review of Economic Dynamics

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We quantify the effects of the Affordable Care Act (ACA) using a stochastic general equilibrium overlapping generations model with endogenous health capital accumulation calibrated to match U.S. data on health spending and insurance take-up over the lifecycle. We find that the introduction of an insurance mandate and the expansion of Medicaid which are at the core of the ACA increase the insurance take-up rate of workers to almost universal coverage but decrease capital accumulation, labor supply and aggregate output. Penalties for not having insurance as well as subsidies to assist low income individuals' purchase of insurance via health insurance market places do reduce the adverse selection problem in private health insurance markets and do counteract the crowding-out effect of the Medicaid expansion. The redistributional measures embedded in the ACA result in welfare gains for low income individuals in poor health and welfare losses for high income individuals in good health. The overall welfare effect depends on the size of the ex-post moral hazard effect, tax distortions and general equilibrium price adjustments. JEL: H51, I18, I38, E21, E62

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“…To the best of our knowledge, there are no suitable estimates for health production processes in equation (5), especially within macro modeling frameworks. A recent empirical contribution by Galama et al (2012) nds weak evidence for decreasing returns to scale which implies ξ < 0.…”

Section: Health Capitalmentioning

confidence: 99%

Optimal Progressive Income Taxation in a Bewley-Grossman Framework

Jung

Tran

2017

SSRN Journal

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We study optimal income tax progressivity in an environment where individuals are exposed to idiosyncratic income and health risks over the lifecycle. Our results, based on a calibration for the US economy, indicate that the presence of health risk combined with incomplete insurance markets amplies the social insurance role of progressive income taxes. The government is required to set higher optimal levels of tax progressivity in order to provide more social insurance for unhealthy low income individuals who have limited access to health insurance. The optimal progressive income tax system includes a tax break for income below $36, 400 and high marginal tax rates of over 50 percent for income above $200, 000. The tax progressivity (Suits) indexa Gini coecient for income tax contributions by incomeof the optimal tax system is around 0.53, compared to 0.17 in the benchmark tax system. Yet, the optimal tax system in our model is more progressive than the optimal tax systems in models abstracting from health risk (e.g., Conesa and Krueger (2006) and Heathcote, Storesletten and Violante (2017)). Importantly, the optimal level of tax progressivity is strongly aected by the design of the health insurance system. When health expenditure risk is reduced or removed from the model, the optimal tax system becomes less progressive and thus more similar to the optimal progressivity levels reported in the previous literature. JEL: E62, H24, I13, D52

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Empirical Evidence for Decreasing Returns to Scale in a Health Capital Model

Cited by 5 publications

References 48 publications

Drug therapy adherence and health outcomes in the presence of physician and patient unobserved heterogeneity

Drug therapy adherence and health outcomes in the presence of physician and patient unobserved heterogeneity

Market inefficiency, insurance mandate and welfare: U.S. health care reform 2010

Optimal Progressive Income Taxation in a Bewley-Grossman Framework

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