Grossman's Missing Health Threshold

Titus Galama and Arie Kapteyn

No WR-684, Working Papers from RAND Corporation

Abstract: The authors 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. Their generalized solution addresses a significant criticism: the model's prediction that health and medical care are positively related is consistently rejected by the data. They suggest structural and reduced form equations to test their generalized solution and contrast the predictions of the model with the empirical literature.

JEL-codes: I10 I12 J00 J24 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2009-05
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Grossman’s missing health threshold (2011)
Working Paper: Grossman’s Missing Health Threshold (2009)
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