TY  - JOUR
AU  - Grossman,Michael
TI  - The Human Capital Model of the Demand for Health
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7078
PY  - 1999
Y2  - April 1999
UR  - http://www.nber.org/papers/w7078
L1  - http://www.nber.org/papers/w7078.pdf
N1  - Author contact info:
Michael Grossman
Ph.D. Program in Economics
City University of New York Graduate Center
365 Fifth Avenue, 5th Floor
New York, NY  10016-4309
Tel: 212/817-7959
Fax: 212/817-1597
E-Mail: mgrossman@gc.cuny.edu
AB  - 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.
ER  -