The Economics of Risky Health Behaviors

John Cawley and Christopher Ruhm

No 5728, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Risky health behaviors such as smoking, drinking alcohol, drug use, unprotected sex, and poor diets and sedentary lifestyles (leading to obesity) are a major source of preventable deaths. This chapter overviews the theoretical frameworks for, and empirical evidence on, the economics of risky health behaviors. It describes traditional economic approaches emphasizing utility maximization that, under certain assumptions, result in Pareto-optimal outcomes and a limited role for policy interventions. It also details nontraditional models (e.g. involving hyperbolic time discounting or bounded rationality) that even without market imperfections can result in suboptimal outcomes for which government intervention has greater potential to increase social welfare. The chapter summarizes the literature on the consequences of risky health behaviors for economic outcomes such as medical care costs, educational attainment, employment, wages, and crime. It also reviews the research on policies and strategies with the potential to modify risky health behaviors, such as taxes or subsidies, cash incentives, restrictions on purchase and use, providing information and restricting advertising. The chapter concludes with suggestions for future research.

Keywords: income; health behaviors; alcohol; tobacco; smoking; drugs; obesity; diet; food; physical activity; public health; public policy; taxation; subsidies; addiction; externalities; advertising; information; behavioral economics; neuroeconomics; human capital; education; prices; sex; time preference; peers; bounded rationality; medical costs; employment; wages; crime; hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D01 D03 D1 D6 D83 D87 H2 I1 I18 I20 I24 J1 Q18 (search for similar items in EconPapers)
Pages: 163 pages
Date: 2011-05
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (204)

Published - published in: Mark V. Pauly, Thomas G. McGuire, and Pedro P. Barros (eds.), Handbook of Health Economics, Volume 2. New York: Elsevier, 2012, 95-199 95-199

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Related works:
Chapter: The Economics of Risky Health Behaviors (2011)
Working Paper: The Economics of Risky Health Behaviors (2011)
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