Budget allocation and the revealed social rate of time preference for health

Mike Paulden and Karl Claxton
Additional contact information
Mike Paulden: Centre for Health Economics, University of York, UK and Toronto Health Economics and Technology Assessment Collaborative, University of Toronto, Canada

No 053cherp, Working Papers from Centre for Health Economics, University of York

Abstract: Appropriate decisions based on cost-effectiveness evaluations of health care technologies depend upon the cost-effectiveness threshold and its rate of growth as well as some social rate of time preference for health. The concept of the cost-effectiveness threshold, social rate of time preference for consumption and social opportunity cost of capital are briefly explored before the question of how a social rate of time preference for health might be established is addressed. A more traditional approach to this problem is outlined before a social decision making approach is developed which demonstrates that social time preference for health is revealed through the budget allocations made by a socially legitimate higher authority. The relationship between the social time preference rate for health, the growth rate of the cost-effectiveness threshold and the rate at which the higher authority can borrow or invest is then examined. We establish that the social time preference rate for health is implied by the budget allocation and the health production functions in each period. As such, the social time preference rate for health depends not on the social time preference rate for consumption or growth in the consumption value of health but on growth in the cost-effectiveness threshold and the rate at which the higher authority can save or borrow between periods. The implications for discounting and the policies of bodies such as NICE are then discussed.

Keywords: Economic; evaluation.; Discounting.; Cost-effectiveness; analysis (search for similar items in EconPapers)
JEL-codes: H43 I18 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2009-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.york.ac.uk/media/che/documents/papers/r ... rence_for_health.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Budget allocation and the revealed social rate of time preference for health (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:chy:respap:53cherp

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