Externality Models and Health:a Rückblick over the last Twenty Years*

Abstract

Economists interested in the political economy of health have attempted to provide a theoretical justification for intervention in the market for health services. Traditional externality analysis, at most, provides a case for variable price subsidies, and the implications of such models do not correspond with the features of existing health care systems. This paper suggests that if the externality is viewed as arising directly from health status, the problem for health policy becomes essentially an engineering one requiring careful analysis of the technical relationships between health services and status. Variable price subsidies are not an obvious implication since individual marginal values of health care become largely irrelevant. Contract costs may be minimized if the ‘firm’ is very large and this may provide the beginning of an explanation for direct State involvement in the production and distribution of health care.

Measuring Health Spillovers for Economic Evaluation: A Case Study in Meningitis

“…In health economics, much of the attention on spillover effects has focused on the wider welfare (as opposed to 'health') impacts of healthcare consumption. Early work by Culyer (Culyer, 1989, Culyer and Simpson, 1980, Culyer, 1971 showed how healthcare consumption could generate welfare gains ('caring externalities') for others in society. Subsequent empirical work has shown that caring externalities extend widely in scope (Jacobsson et al, 2005) and can be large in magnitude (Drummond et al, 1991, Basu et al, 2010, Hurley and Mentzakis, 2013, Prosser et al, 2004.…”

Economic Rationales for the Design of Health Care Financing Schemes

“…The external effects generated by an individual's non-consumption of health care services' are mainly the consequence of two types of interpersonal preferences: altruistic and egoistic preferences. The literature (Culyer & Simpson, 1980;van Doorslaer & Schut, 1999) tracks down a third type of interpersonal preferences so-called paternalistic preferences. Since the only average, people contribute only a portion of their resources to the provision of the public good, suggesting the existence of some free riding.…”

Who Benefits from Removing User Fees for Health Care? Evidence from a Randomised Experiment in Ghana

“…First, there are gains from avoiding the risk of financial loss (Gertler and Gruber, 2002;Zeckhauser, 1970). Second, there may be positive externalities associated with health care, particularly in the case of preventive services, such that health care use absent health insurance is inefficiently low (Culyer and Simpson, 1980). Third, health insurance allows individuals to access care that they would otherwise not have been able to afford (Nyman, 1999).…”