Summary Chapter 1, Introduction (Mattias Fritz)




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The Production of Health in the Modern Day

How to Measure Health


Two characteristics are desirable when measuring health:


  1. It must capture the aspects of health status that are meaningful to us.

  2. It must be measurable with adequate precision.


Mortality rates are used because of the accuracy in the data. However, this number does not capture several meaningful aspects of health status such as reduction of pain and suffering and other improvements in the quality of life. Besides mortality, other indicators such as morbidity rates and disability days have been used.

Eliminate Biases


Econometricians are facing a problem in eliminating biases. When evaluating the health, a number of inputs are not captured or there is no or little information available. An example of this is the level of exercise among different groups in populations. Since such a variable may be highly correlated with other inputs, e.g. physicians per capita, the resulting estimate may consequently be biased.

The Contribution of Health Care to Population Health: The Modern Era


The most common estimate of the marginal product of health care is the elasticity with respect to expenditure on health care inputs (% change in health) / (% increase in health care expenditures).


The general picture that emerges from elasticity studies shows that health care is a statistically significant contributor (elasticity around 0.1) to health on the margin, but that its marginal effect on health is small. Health care matters, but again, we are nearly on the flat of the curve. However, subgroups such as females and blacks show a higher elasticity than the average of the population.

Morbidity Studies


While health services do reduce mortality rates (although the marginal contribution is small), mortality rates tell only a part of the story. Other morbidity data (e.g. psychological measures) and indicators of health such as work loss days per employed person per year should also be examined.


Also from these types of studies researchers have found little evidence for a significant positive correlation between health care and health status. As an example, a 40% increase in health care inputs did not significantly improve the health status in the population. Furthermore, the level of education – not income – has been found to be far more important for improving individual health status.

The Importance of Lifestyle and Environment


It has been claimed that what the individual does (or does not) do for himself affects health more than do additional medical resources. When controlling for lifestyle factors such as cigarette and alcohol consumption, a positive relationship between health care and health has been found in several countries.


The importance of lifestyle and environment for a population’s health is illustrated by comparing the states of Nevada and Utah. These states are contiguous and share approximately the same level s of income and medical care and are alike in many other respects. Nevertheless, average death rates in Nevada are much in excess of those in Utah. It has been argued that this difference is attributed to the low consumption of tobacco and alcohol among the devout Mormons in Utah, while Nevada is a state with high indexes of marital and geographical instability combined with high consumption levels of tobacco and alcohol.


Lifestyle factors are also important in the production of newborn health. Women have long been warned to avoid cigarettes and alcohol while pregnant, which significantly affects the birth weight of newborns negatively. The same holds true for other forms of drug abuse.

Environmental Pollution


It is well known that pollution causes ill health and that the elderly and people with respiratory problems are more susceptible. The degree to which reductions in pollution will improve health is somewhat unclear, but studies in New Delhi and Philadelphia show that pollution effects on health are sizable in both industrialized and lesser-developed countries.
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