Valuing the benefits from health care interventions using life satisfaction data

P. Howley

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: This paper uses life satisfaction data to calculate the extent to which individuals are willing to trade money for improvements in their health status. Using a large nationally representative survey in the UK, I showthat the amount of extra equivalent household income to make someone with a health condition, as well off in terms of life satisfaction as someone without the health condition, ranges from a low of £4,235 per annum for impairments associated with asthma to a high of £31,283 for impairments associated with congestive heart failure. These values could be used as a basis for a cost-benefit analysis of health care interventions aimed at the medical conditions examined. Relative to previous work, I address a number of critical empirical challenges when it comes to using this compensating income variation approach for determining the monetary value of a health improvement. First, I address the issue of income endogeneity in life satisaction by instrumenting income with the educational status of respondents’ parents. Second, I control for the potentially confounding role of personality differences by including a measure of the Big Five personality traits in the micro-econometirc analysis of life satisfaction.

Keywords: life satisfaction; compensating income variation; instrumental variables; health conditions (search for similar items in EconPapers)
JEL-codes: I1 I31 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-eur, nep-hap and nep-hea
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:yor:hectdg:16/01

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