ECO 738 Health Policy
Spring 2015
Mondays and Wednesdays from 9:30-10:45 AM, Bryan 456
Instructor: Martin Andersen
Office: Bryan 448
Office Hours: TBD
E-mail: msander4@uncg.edu
Overview
This is a second semester course in health economics, with a focus on specific topics. The
(tentative) list of topics is: 1) Innovation; 2) Contract Issues; 3) Mental Health; 4) Risky
Behaviors; 5) Environmental Determinants of Health. I am happy to discuss changing
these modules during the first week of class. In addition to covering several topics in
health economics in greater detail than was possible in the first semester of the course, a
second goal of this course is for you to write a paper or research proposal. I expect a
high-quality product and will be checking in with you regularly through written monthly
progress reports and brief (5-10 minute) presentations every three weeks or so. The goal
in both cases is to make sure that you are on track and that no unpleasant surprises pop
up as you are working on the paper.
Prerequisites
Students should have a firm grasp of microeconomic theory and applied econometrics.
Previous enrollment in a basic health economics course is desirable, as is basic familiarity
with information economics (on the level of the papers by Rothschild and Stiglitz (QJE
1976) and Akerlof (QJE 1970)). For students who have not taken a previous health
economics course, I will hold additional “refresher” sessions during the first two weeks of
the semester.
Grading and Evaluation
The overall grade for the course will be based on a series of referee reports, progress on
a research project (either a research proposal or a paper), and comments to your
classmates on their research. Most classes will end with a five to ten minute presentation
on an individual’s progress in his or her research project. The goal of these presentations
is to encourage discussion of the challenges you are facing in your research and to get
feedback on how best to move forward. Sometimes you may only have good news to
report, other times only bad news—in either case, tell us!
As part of the research project assignment, you will turn in a monthly progress report to
me. In most cases the progress report should be a current draft of your work and we will
meet one-on-one the following week to discuss the progress report.
Each module includes a referee report assignment, where you will write a referee report
on one of the assigned readings in that module. The report is due at 9AM on the day of
the last class of the module.
Grades will be based on:
1. In class comments (25%)
2. Referee reports (25%)
3. Final Paper (50%)
Structure of the Course
The course will proceed in “modules” covering topics that I either know or suspect are of
interest to you. We can adjust these modules, if necessary, on the first day of class.
The tentative list of modules is:
1. Innovation in the Health (Care) Sector
2. Incentive Compatibility Issues in Insurance Contracts
3. Mental Health
4. Risky Behaviors
5. Environmental Determinants of Health
I have prepared a reading list for each module, but this list should be thought of as
tentative—if there is a paper that you think I missed, please let me know and I will
(probably) add it to the list.
Note: I reserve the right to change readings, order of topics, assignments, etc., as
needed.
Course Mechanics
Each class will begin with a fifteen minute research update from one, or more, students
in the class. The goal of the research update is to provide accountability for working on
your term paper/dissertation; sometimes working equals progress, sometimes not. But
bring your problems to class and allow all of us to help you find a way forward. I may also
bring some of my stumbles to the class and ask for your advice.
Textbook
There is no assigned textbook for this class, rather we will be using journal articles and,
occasionally, chapters from the Handbook of Health Economics. However, the following
books may well be useful during the semester:
Culyer, A. J., & Newhouse, J. P. (Eds.). (2000). Handbook of Health Economics, Volumes 1A
& 1B. Amsterdam ; New York: North Holland.
Pauly, M. V., McGuire, T. G., & Barros, P. P. (Eds.). (2012). Handbook of Health Economics,
Volume 2 (1 edition.). Amsterdam: North Holland.
Writing
This course will be writing intensive, so I encourage you to make use of writing resources
available at UNCG and on the internet. In addition, I highly recommend:
McCloskey, D. (1999). Economical Writing (2 edition.). Prospect Heights, Ill: Waveland Pr
Inc.
Silvia, P. J. (2007). How to Write a Lot: A Practical Guide to Productive Academic Writing
(1 edition.). Washington, DC: Amer Psychological Assn.
Thomson, W. (2011). A Guide for the Young Economist (second edition.). Cambridge,
Mass: The MIT Press.
Schedule
Date
1/12
1/14
1/21
1/28
2/2
2/4
2/9
2/11
2/18
2/23
2/25
3/2
3/4
3/16
3/18
3/23
3/25
3/30
4/1
4/6
4/8
4/13
4/15
4/20
4/22
4/27
5/1
Topic
Introduction
Module 1—Innovation
Module 1—Innovation
Module 1—Innovation
Module 1—Innovation
Progress Report 0 due
Module 1—Innovation
Module 2—Incentive Compatibility Issues in Insurance Contracts
Module 2—Incentive Compatibility Issues in Insurance Contracts
Module 2—Incentive Compatibility Issues in Insurance Contracts
Module 2—Incentive Compatibility Issues in Insurance Contracts
Module 3—Mental Health
Module 3—Mental Health
Progress Report 1 due
Module 3—Mental Health
Module 3—Mental Health
Module 3—Mental Health
Module 4—Risky Behaviors
Module 4—Risky Behaviors
Module 4—Risky Behaviors
Module 4—Risky Behaviors
Progress Report 2 due
Module 4—Risky Behaviors
Module 5—Environmental Determinants of Health
Module 5—Environmental Determinants of Health
Module 5—Environmental Determinants of Health
Module 5—Environmental Determinants of Health
Flex Day*
STUDENT PRESENTATIONS
FINAL PAPER DUE
* The Flex Day may move around the schedule as needed to accommodate unexpected
scheduling hiccups, etc.
Readings
Introduction and Required Background
The Health Capital Model
Grossman, Michael. “The Human Capital Model,” Volume 1:, Part 1:347–408. Elsevier,
2000.
Institutions and the Demand for Health Care
Arrow, Kenneth J. “Uncertainty and the Welfare Economics of Medical Care.” The
American Economic Review 53, no. 5 (December 1963): 941–73.
Manning, Willard G, Joseph P Newhouse, Naihua Duan, Emmett B Keeler, and Arleen
Leibowitz. “Health Insurance and the Demand for Medical Care: Evidence from a
Randomized Experiment.” The American Economic Review 77, no. 3 (June 1987):
251–77.
Pauly, Mark V. “The Economics of Moral Hazard: Comment.” The American Economic
Review 58, no. 3 (June 1968): 531–37.
Information Economics
Akerlof, George A. “The Market for ‘Lemons’: Quality Uncertainty and the Market
Mechanism.” The Quarterly Journal of Economics 84, no. 3 (August 1970): 488–
500. doi:10.2307/1879431.
Rothschild, Michael, and Joseph Stiglitz. “Equilibrium in Competitive Insurance Markets:
An Essay on the Economics of Imperfect Information.” The Quarterly Journal of
Economics 90, no. 4 (November 1976): 629–49.
Module 1—Innovation
Day 1
Goddeeris, J. H. (1984a). Insurance and Incentives for Innovation in Medical Care.
Southern Economic Journal, 51(2), 530–539. doi:10.2307/1057830
Goddeeris, J. H. (1984b). MEDICAL INSURANCE, TECHNOLOGICAL CHANGE, AND
WELFARE. Economic Inquiry, 22(1), 56–67. doi:10.1111/j.1465-7295.1984.tb00666.x
Garber, A. M., Jones, C. I., & Romer, P. (2006). Insurance and Incentives for Medical
Innovation. Forum for Health Economics and Policy, 9(2). Retrieved from
https://libproxy.uncg.edu/login?url=http://search.ebscohost.com/login.aspx?direct=
true&db=eoh&AN=0952850&site=ehost-live
Day 2
Baumgardner, J. R. (1991). The Interaction between Forms of Insurance Contract and
Types of Technical Change in Medical Care. The RAND Journal of Economics, 22(1),
36–53.
Hsieh, C.-R., Liu, Y.-M., & Chang, C.-L. (2013). Endogenous Technological Change in
Medicine and Its Impact on Healthcare Costs: Evidence from the Pharmaceutical
Market in Taiwan. European Journal of Health Economics, 14(2), 287–295.
Day 3
Williams, H. L. (2013). Intellectual Property Rights and Innovation: Evidence from the
Human Genome. Journal of Political Economy, 121(1), 1–27. doi:10.1086/669706
Blume-Kohout, M. E. (2012). Does Targeted, Disease-Specific Public Research Funding
Influence Pharmaceutical Innovation? Journal of Policy Analysis and Management,
31(3), 641–660. doi:10.1002/%28ISSN%291520-6688/issues
Day 4
DiMasi, J. A., Hansen, R. W., & Grabowski, H. G. (2003). The price of innovation: new
estimates of drug development costs. Journal of Health Economics, 22(2), 151–185.
doi:10.1016/S0167-6296(02)00126-1
Acemoglu, D., & Linn, J. (2004). Market Size In Innovation: Theory And Evidence From The
Pharmaceutical Industry*. Quarterly Journal of Economics, 119(3), 1049–1090.
doi:10.1162/0033553041502144
Blume-Kohout, M. E., & Sood, N. (2013). Market size and innovation: Effects of Medicare
Part D on pharmaceutical research and development. Journal of Public Economics,
97, 327–336. doi:10.1016/j.jpubeco.2012.10.003
Yin, W. (2008). Market incentives and pharmaceutical innovation. Journal of Health
Economics, 27(4), 1060–1077. doi:10.1016/j.jhealeco.2008.01.002
Finkelstein, A. (2004). Static and Dynamic Effects of Health Policy: Evidence from the
Vaccine Industry*. Quarterly Journal of Economics, 119(2), 527–564.
doi:10.1162/0033553041382166
Day 5—Catch up and Wrap Up
Weisbrod, B. A. (1991). The Health Care Quadrilemma: An Essay on Technological
Change, Insurance, Quality of Care, and Cost Containment. Journal of Economic
Literature, 29(2), 523–552.
Module 2—Incentive Compatibility Issues in Insurance Contracts
Day 6
Hendel, I., & Lizzeri, A. (2003). The Role of Commitment in Dynamic Contracts: Evidence
from Life Insurance*. Quarterly Journal of Economics, 118(1), 299–327.
doi:10.1162/00335530360535216
Finkelstein, A., & McGarry, K. (2006). Multiple Dimensions of Private Information:
Evidence from the Long-Term Care Insurance Market. The American Economic
Review, 96(4), 938–958.
Zweifel, P., & Strüwe, W. (1998). Long-term care insurance in a two-generation model.
Journal of Risk and Insurance, 13–32.
Day 7
Fang, H., & Gavazza, A. (2011). Dynamic Inefficiencies in an Employment-Based Health
Insurance System: Theory and Evidence. American Economic Review, 101(7), 3047–
3077. doi:10.1257/aer.101.7.3047
Herring, B. (2010). Suboptimal provision of preventive healthcare due to expected
enrollee turnover among private insurers. Health Economics, 19(4), 438–448.
doi:10.1002/hec.1484
Day 8
Cochrane, J. H. (1995). Time-Consistent Health Insurance. The Journal of Political
Economy, 103(3), 445–473.
Herring, B., & Pauly, M. V. (2006). Incentive-compatible guaranteed renewable health
insurance premiums. Journal of Health Economics, 25(3), 395–417.
doi:10.1016/j.jhealeco.2005.09.008
Pauly, M. V., Kunreuther, H., & Hirth, R. (1995). Guaranteed renewability in insurance.
Journal of Risk and Uncertainty, 10(2), 143–156.
Pauly, M. V., Menzel, K., Kunreuther, H., & Hirth, R. A. (2011). Guaranteed renewability
uniquely prevents adverse selection in individual health insurance. Journal of Risk
and Uncertainty. doi:10.1007/s11166-011-9124-2
Day 9—Catch up and wrap up
Breyer, F., Bundorf, M. K., & Pauly, M. V. (2011). Chapter Eleven - Health Care Spending
Risk, Health Insurance, and Payment to Health Plans. In Handbook of Health
Economics (Vol. Volume 2, pp. 691–762). Elsevier. Retrieved from
http://www.sciencedirect.com/science/article/pii/B9780444535924000116
Module 3—Mental Health
Day 10
Gade, D. M., & Wenger, J. B. (2011). Combat Exposure and Mental Health: The LongTerm Effects among US Vietnam and Gulf War Veterans. Health Economics, 20(4),
401–416. doi:10.1002/%28ISSN%291099-1050/issues
Johnston, D. W., Schurer, S., & Shields, M. A. (2013b). Exploring the intergenerational
persistence of mental health: Evidence from three generations. Journal of Health
Economics, 32(6), 1077–1089. doi:10.1016/j.jhealeco.2013.09.001
Hansen, B., & Lang, M. (2011). Back to school blues: Seasonality of youth suicide and the
academic calendar. Economics of Education Review, 30(5), 850–861.
doi:10.1016/j.econedurev.2011.04.012
Marcus, J. (2013). The effect of unemployment on the mental health of spouses –
Evidence from plant closures in Germany. Journal of Health Economics, 32(3), 546–
558. doi:10.1016/j.jhealeco.2013.02.004
Hauck, K., & Rice, N. (2004). A longitudinal analysis of mental health mobility in Britain.
Health Economics, 13(10), 981–1001. doi:10.1002/hec.939
Day 11
Daly, M. C., Wilson, D. J., & Johnson, N. J. (2013). Relative Status and Well-Being:
Evidence from U.S. Suicide Deaths. Review of Economics and Statistics, 95(5), 1480–
1500. doi:10.1162/REST_a_00355
McInerney, M., Mellor, J. M., & Nicholas, L. H. (2013). Recession depression: Mental
health effects of the 2008 stock market crash. Journal of Health Economics, 32(6),
1090–1104. doi:10.1016/j.jhealeco.2013.09.002
Baird, S., de Hoop, J., & Ozler, B. (2013). Income Shocks and Adolescent Mental Health.
Journal of Human Resources, 48(2), 370–403.
Boyce, C. J., & Oswald, A. J. (2012). Do People Become Healthier after Being Promoted?
Health Economics, 21(5), 580–596. doi:10.1002/%28ISSN%291099-1050/issues
Day 12
Currie, J., & Stabile, M. (2006). Child mental health and human capital accumulation: The
case of ADHD. Journal of Health Economics, 25(6), 1094–1118.
doi:10.1016/j.jhealeco.2006.03.001
Busch, S. H., Golberstein, E., & Meara, E. (2014). The FDA and ABCs: Unintended
Consequences of Antidepressant Warnings on Human Capital. Journal of Human
Resources, 49(3), 540–571.
Fletcher, J., & Wolfe, B. (2008). Child mental health and human capital accumulation: The
case of ADHD revisited. Journal of Health Economics, 27(3), 794–800.
doi:10.1016/j.jhealeco.2007.10.010
Day 13
Cseh, A. (2008). The Effects of Depressive Symptoms on Earnings. Southern Economic
Journal, 75(2), 383–409.
Fletcher, J. M. (2013). The Effects of Childhood Adhd on Adult Labor Market Outcomes.
Health Economics, n/a–n/a. doi:10.1002/hec.2907
Frijters, P., Johnston, D. W., & Shields, M. A. (2014). The Effect of Mental Health on
Employment: Evidence from Australian Panel Data. Health Economics, 23(9), 1058–
1071. doi:10.1002/%28ISSN%291099-1050/issues
Tefft, N. (2011). Insights on unemployment, unemployment insurance, and mental
health. Journal of Health Economics, 30(2), 258–264.
doi:10.1016/j.jhealeco.2011.01.006
Day 14—Catch up and wrap up
Frank, R. G., & McGuire, T. G. (2000). Economics and mental health. In Handbook of
Health Economics (Vol. Volume 1, Part 2, pp. 893–954). Elsevier. Retrieved from
http://www.sciencedirect.com.ezp1.harvard.edu/science/article/B7P5R-4FF8276W/2/7c72e2b65c41420922471dff2034e5da
Van Ours, J. C., & Williams, J. (2012). The effects of cannabis use on physical and mental
health. Journal of Health Economics, 31(4), 564–577.
doi:10.1016/j.jhealeco.2012.04.003
Sabia, J. J. (2006). Does Early Adolescent Sex Cause Depressive Symptoms? Journal of
Policy Analysis and Management, 25(4), 803–825. doi:10.1002/%28ISSN%2915206688/issues
Module 4—Risky Behaviors
Day 15
Kearney, M. S., & Levine, P. B. (2009). Subsidized Contraception, Fertility, and Sexual
Behavior. Review of Economics and Statistics, 91(1), 137–151.
Chesson, H. W., Leichliter, J. S., Zimet, G. D., Rosenthal, S. L., Bernstein, D. I., & Fife, K. H.
(2006). Discount rates and risky sexual behaviors among teenagers and young
adults. Journal of Risk and Uncertainty, 32(3), 217–230. doi:10.1007/s11166-0069520-1
Oettinger, G. S. (1999). The Effects of Sex Education on Teen Sexual Activity and Teen
Pregnancy. Journal of Political Economy, 107(3), 606–644.
Day 16
Dupas, P. (2011). Do Teenagers Respond to HIV Risk Information? Evidence from a Field
Experiment in Kenya. American Economic Journal: Applied Economics, 3(1), 1–34.
Lakdawalla, D., Sood, N., & Goldman, D. (2006). HIV Breakthroughs and Risky Sexual
Behavior. The Quarterly Journal of Economics, 121(3), 1063 –1102.
doi:10.1162/qjec.121.3.1063
Day 17
Carpenter, C. (2005). Youth alcohol use and risky sexual behavior: evidence from
underage drunk driving laws. Journal of Health Economics, 24(3), 613–628.
doi:10.1016/j.jhealeco.2004.09.014
Grossman, M., Kaestner, R., & Markowitz, S. (2004). Get High and Get Stupid: The Effect
of Alcohol and Marijuana Use on Teen Sexual Behavior. Review of Economics of the
Household, 2(4), 413–441.
Grossman, M., & Markowitz, S. (2005). I Did What Last Night?! Adolescent Risky Sexual
Behaviors and Substance Use. Eastern Economic Journal, 31(3), 383–405.
Klick, J., & Stratmann, T. (2003). The Effect of Abortion Legalization on Sexual Behavior:
Evidence from Sexually Transmitted Diseases. Journal of Legal Studies, 32(2), 407–
433.
Khwaja, A., Sloan, F., & Chung, S. (2007). The relationship between individual
expectations and behaviors: Mortality expectations and smoking decisions. Journal
of Risk and Uncertainty, 35, 179–201. doi:10.1007/s11166-007-9019-4
Day 18
Von Hinke Kessler Scholder, S., Wehby, G. L., Lewis, S., & Zuccolo, L. (2014). Alcohol
Exposure In Utero and Child Academic Achievement. The Economic Journal,
124(576), 634–667. doi:10.1111/ecoj.12144
Zarkin, G. A., French, M. T., Mroz, T., & Bray, J. W. (1998). Alcohol use and wages: New
results from the national household survey on drug abuse. Journal of Health
Economics, 17(1), 53–68. doi:10.1016/S0167-6296(97)00023-4
Buchmueller, T. C., & Zuvekas, S. H. (1998). Drug use, drug abuse, and labour market
outcomes. Health Economics, 7(3), 229–245. doi:10.1002/(SICI)10991050(199805)7:3<229::AID-HEC315>3.0.CO;2-R
Farrelly, M. C., Bray, J. W., Zarkin, G. A., & Wendling, B. W. (2001). The joint demand for
cigarettes and marijuana: evidence from the National Household Surveys on Drug
Abuse. Journal of Health Economics, 20(1), 51–68. doi:10.1016/S01676296(00)00067-9
French, M. T., Roebuck, M. C., & Alexandre, P. K. (2001). Illicit Drug Use, Employment,
and Labor Force Participation. Southern Economic Journal, 68(2), 349–368.
Day 19—Catch up and Wrap up
Module 5—Environmental Determinants of Health
Day 20
Almond, D., Edlund, L., & Palme, M. (2009). Chernobyl’s Subclinical Legacy: Prenatal
Exposure to Radioactive Fallout and School Outcomes in Sweden. The Quarterly
Journal of Economics, 124(4), 1729 –1772. doi:10.1162/qjec.2009.124.4.1729
Sanders, N. J. (2012). What Doesn’t Kill You Makes You Weaker: Prenatal Pollution
Exposure and Educational Outcomes. Journal of Human Resources, 47(3), 826–850.
Day 21
Cutler, D., & Miller, G. (2005). The role of public health improvements in health advances:
The twentieth-century United States. Demography, 42(1), 1–22.
doi:10.1353/dem.2005.0002
Ebenstein, A. (2012). The Consequences of Industrialization: Evidence from Water
Pollution and Digestive Cancers in China. Review of Economics and Statistics, 94(1),
186–201.
Currie, J., Zivin, J. S. G., Meckel, K., Neidell, M. J., & Schlenker, W. (2013). Something in
the Water: Contaminated Drinking Water and Infant Health (Working Paper No.
18876). National Bureau of Economic Research. Retrieved from
http://www.nber.org/papers/w18876
Day 22
Greenstone, M., & Hanna, R. (2014). Environmental Regulations, Air and Water Pollution,
and Infant Mortality in India. American Economic Review, 104(10), 3038–72.
doi:10.1257/aer.104.10.3038
Jayachandran, S. (2009). Air Quality and Early-Life Mortality: Evidence from Indonesia’s
Wildfires. Journal of Human Resources, 44(4), 916–954.
Day 23
Day 24—Catch up and Wrap up