Chapter 5 The Production of

Health
1. The Production of Health
2. The historical role of medicine and health care
3. The production function of health in the modern day
4.

The role of schooling

The production of Health

Two features
1. The trivial contribution to historical
decline in death rate
2. Small marginal contribution
Health Status=f(Health Care, Lifestyle,
biological Enviroment, Human Biology)
note : difficulties of measuring HS

Figure 5.1 Production of Health

The law of diminishing marginal returns
Q: Would the health production function
eventually bend down (i.e. negative
marginal product of health care)?
Cochrane (1972): Iatrogenic (providercaused disease)
Dubos (1960) and Illich (1976): disability
such as less effort to preserve health

The historical role of medical and

health care
The Rising Population and the rate of
medicine
Mckeown (1976): the dramatic rise in
population in England and Wales from
1750
(1) Declines in birth rate
(2) the decline in death rate

What caused the mortality rate

decline?
The availability of Medical Intervention after the
majority of the mortality decline
(Figure 5-3)
Reduction in exposure to infection:
Public health measures such as immunization,
quarantines, standards for sanitary water
supplies and sewage system.
Improvement in the human hosts ability to resist
inflection: the improved nutrition

Is medical research unimportant in

history or present day?
The influence on health-enhanceenhancing practice
Different numerator and denominator:
[Example] the effectiveness of a treatment
for cancer
Successful medical intervention come late

What does health care contribute?

Bunker, Franzier, and Mosteller (1994)
1. Disappointing in preventive health care
2. Effective in treating pain, discomfort and
the gains to quality of life

The Production of health in the

modern day
how to measure health
(1) mortality data (accuracy)
(2) morbidity (illness) rates
Eliminating Biases: Reduced Form Versus
Structural form

Empirical studies about Mortality

rate

Table 5-2 shows that a significant but

small contribution of health care to
reduce
Does health care provide little benefit?
On the fat of the production curve
(assuming constant technology)?
(1) Medical technological improvement
(2) The small marginal effect of health care
is worth if MR>MC

 Issue of race and gender:

In table 5-3, Hadely reports the health care
production elasticity for Medicare
population
=> higher elasticity for females and blacks
Prenatal Care Works
Table 5-4 shows that WIC program reduce
white (blacks) neonate mortality rates of
0.425 (1.330) per 1000 lives
The worlds pharmacies:
OECD countries with higher drugs
consumption have greater life expectation

Morbidity Studies
The Rand Health Insurance Experiment
(RHIE): the grater portion of health care bill
pay, the less health care buy.
=> the more health care, the more health?
a measure of health status and morbiditywork loss days per employed per year
(Table 5-5)
(1)Newhouse et al. (1993): little or not effect
(2)Valdez et al. (2005): not significant

On the Importance of lifestyle and environment

Wolfe (1986): a positive relationship between health care and
health in several countries after controlling lifestyle
Similar conclusion in Hitiris and Posnetts study (1992)
Cigarette and health: negative production elasticity
Q: can health affect the decision to quit smoking?
1.Jones (1996): Preventive motive (healthy people) and
curative motive (ill individual)
2. Folland (2006) : family or community social capital
Maternal smoke and drugs use causes significant harm to
newborns.
Evans and Ringel (1999): taxing cigarette
The pollution effects on health are sizable in both in
industrialized and lesser developed countries (Cropper et al.
1997) and similar cases seen in Schwartz and Dockery(1992)
Earlier studies suggest that richer American have better health
?Deaton and Paxson(2001): technology ; Pritchett and
Summer (1996): only extremely low incomes

the role of schooling

Education is measure by years of

educating and diploma
Two theories
(1)Grossman : efficient producer
(2)Fuchs: self-section problem like timepreference
Empirical studies
Berger and Leigh (1989): schooling
directly improve health but not from
unobservables like time preference

 Berman and Wolfe (1989): the estimated

positive health effect on the womans
schooling
Does it also affect childrens health?
Yes but not significant in Wolfen and
Behrman (1987) after controlling childhood
background