Summary Chapter 1, Introduction (Mattias Fritz)




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Effects of changes in income-optimal combination changes when factors affecting behavior change





Holding other factors constant, consider the effects of changing income and consider Figure 11. Here, income falls from £40 to £32, which is depicted by the parallel shift inward in the budget constraint in quadrant 3 and so creates an inward shift of the WPF in quadrant 1. The individual now has less to spend on health inputs and consumption and is demoted to attain point b where both health and consumption is lowered:

Fall in income  reduction in health units  deterioration of health status.


What about policy? A strategy of preventive health policy suggests supplementing income of low wage families. From inequality perspective, changes in socioeconomic inequalities will reflect changes in distribution of income. The impact of unemployment on health will probably depend on the generosity of the unemployment benefit system- for instance look at Figure 12 where income is allowed to drop even further so deteriorates health status even further.


Figure 13 plots the relationship between health and income, which is not linear. Income supplements will be especially effective among low-income groups as there is diminishing marginal product of health inputs. From the viewpoint of inequality, a redistribution of income from high to low income group will result in small deterioration and large improvement of the health status of the high and low income group, respectively. Finally, the analysis suggest that unemployment will lead smaller impairments to health in richer than in poorer countries holding the same generosity in the unemployment benefit system.


Effects of changes in prices





Give respect to Figure 14 where the price of health inputs has fallen from £8 to £5.90 per unit causing the budget line to swivel outward about the intercept on the consumption axis, which then causes the outward swivel of the WPF. Note that since the price of consumption remains the same, the end-point on the consumption axis remains the same. The new optimal combination point is b, where the individual is in better health through employing more, cheaper, health units. Subsidizing things like milk, heating may therefore be a more effective, though not efficient, health promotion strategy.

Changes in the state of technical knowledge





Figure 15 depicts what happens when a change in the state of technical knowledge occurs. The upward shift in the health production function results in a change in the WPF and optimality at point b where the individual is in better health. The improvement in state of technical knowledge results in a reduction in the utilization of health inputs since an individual obtains more health per unit of health input. Education is thus good for your health since it secures health improvements. Note that utilization of health units here will decrease, a case opposite of an increase in income, where health and health input utilization increases. So, health education improves health and reduces demand on health inputs. Inequalities in education is a factor in inequalities in health; the more educated one is, and so is more efficient in producing health, then the more likely one is to demand more health.

Discussion



Empirical work on the demand for health is only in its infancy, and it is too early to pronounce a final verdict. Though it is illustrated how price subsidies and income supplements lead to health improvements, the theory doesn’t predict which is more effective. Also, the demand for health approach cannot indicate by itself cost effectiveness and so should be used in conjunction with other tools like cost-benefit analysis and cost effectiveness analysis.


Article: Summary of Jönsson and Eckerlund:

Why do Different Countries Spend Different Amounts on Health Care?

– Macroeconomic Analysis of Differences in Health Care Expenditure

(Erik Mohlin)

Let me (the summariser) first of all point out that his is a not a very good or interesting article. It is unstructured, superficial and does not really have any conclusions of its own. Anyway…

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