Grossman’s missing health threshold

Titus Galama and Arie Kapteyn

Journal of Health Economics, 2011, vol. 30, issue 5, 1044-1056

Abstract: We present a generalized solution to Grossman’s model of health capital (1972), relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an “optimal” level without adjustment costs. The Grossman model then predicts the existence of a health threshold above which individuals do not demand medical care. Our generalized solution addresses a significant criticism: the model’s prediction that health and medical care are positively related is consistently rejected by the data. We suggest structural- and reduced-form equations to test our generalized solution and contrast the predictions of the model with the empirical literature.

Keywords: Health; Demand for health; Health capital; Medical care; Labor (search for similar items in EconPapers)
JEL-codes: I10 I12 J00 J24 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (25)

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Working Paper: Grossman's Missing Health Threshold (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:30:y:2011:i:5:p:1044-1056

DOI: 10.1016/j.jhealeco.2011.06.004

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