IDEAS home Printed from https://ideas.repec.org/a/spr/eurase/v7y2017i1d10.1007_s40822-016-0059-4.html
   My bibliography  Save this article

Health-conscious consumer behavior

Author

Listed:
  • Hiroaki Hayakawa

    (Universiti Brunei Darussalam)

Abstract

This paper presents a model of health-conscious consumer behavior under the assumption that health, produced by consumption, enters the utility function and affects simultaneously the income earning capacity of the consumer through its impact on the efficiency of work performance, hence the budget constraint. We demonstrate that the optimization requires that the total marginal utility of a good, arising partly from the good itself and partly from an induced gain of health, equal the implicit utility value of its effective price, which is calculated from the market price by adjusting it for an incremental income due to an induced gain in health. This explains why health-enhancing goods are treated favorably and health-harming ones are avoided as well as why the knowhow regarding how to produce and maintain health affects consumer choice. We offer new interpretations of the Slutsky Equation and Shephard’s Lemma in relation to the Hicks–Samuelson theory as the reference model. Both static and dynamic cases are analyzed with or without leisure, to elucidate the exact working of the equi-marginal principle in each case and to draw implications on several theories including the permanent income hypothesis and the efficiency wage hypothesis.

Suggested Citation

  • Hiroaki Hayakawa, 2017. "Health-conscious consumer behavior," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 1-31, April.
    • Handle: RePEc:spr:eurase:v:7:y:2017:i:1:d:10.1007_s40822-016-0059-4
    DOI: 10.1007/s40822-016-0059-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40822-016-0059-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40822-016-0059-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Angus Deaton, 2003. "Health, Inequality, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 113-158, March.
    3. Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 941-964.
    4. Anne Case & Angus S. Deaton, 2005. "Broken Down by Work and Sex: How Our Health Declines," NBER Chapters, in: Analyses in the Economics of Aging, pages 185-212, National Bureau of Economic Research, Inc.
    5. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
    6. Kuhn, Michael & Wrzaczek, Stefan & Prskawetz, Alexia & Feichtinger, Gustav, 2015. "Optimal choice of health and retirement in a life-cycle model," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 186-212.
    7. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    8. Bliss, Christopher & Stern, Nicholas, 1978. "Productivity, wages and nutrition : Part I: the theory," Journal of Development Economics, Elsevier, vol. 5(4), pages 331-362, December.
    9. David N. Weil, 2005. "Accounting for the Effect of Health on Economic Growth," NBER Working Papers 11455, National Bureau of Economic Research, Inc.
    10. Bliss, Christopher & Stern, Nicholas, 1978. "Productivity, wages and nutrition : Part II: Some observations," Journal of Development Economics, Elsevier, vol. 5(4), pages 363-398, December.
    11. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(3), pages 441-463.
    12. Bloom, David E. et.al., 2013. "Economic impact of non-communicable disease in China and India: Estimates, projections and comparisons," Working Papers 300, Institute for Social and Economic Change, Bangalore.
    13. Ruhm, Christopher J. & Black, William E., 2002. "Does drinking really decrease in bad times?," Journal of Health Economics, Elsevier, vol. 21(4), pages 659-678, July.
    14. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    15. Suen, Wing & Mo, Pak Hung, 1994. "Simple Analytics of Productive Consumption," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 372-383, April.
    16. Christopher J. Ruhm, 2000. "Are Recessions Good for Your Health?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 617-650.
    17. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    18. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 543-569.
    19. Ruhm, Christopher J., 1995. "Economic conditions and alcohol problems," Journal of Health Economics, Elsevier, vol. 14(5), pages 583-603, December.
    20. Grossman, Michael, 2000. "The human capital model," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 7, pages 347-408, Elsevier.
    21. Martin Forster, "undated". "The meaning of death: some numerical simulations of a model of healthy and unhealthy consumption," Discussion Papers 00/34, Department of Economics, University of York.
    22. David A. Wise, 2005. "Analyses in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise05-1.
    23. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
    24. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    25. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1.
    26. David E. Bloom & David Canning & Michael Moore, 2014. "Optimal Retirement with Increasing Longevity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(3), pages 838-858, July.
    27. Tuchman, Anna E. & Nair, Harikesh S. & Gardete, Pedro M., 2015. "Complementarities in Consumption and the Consumer Demand for Advertising," Research Papers 3288, Stanford University, Graduate School of Business.
    28. T. Paul Schultz, 2002. "Wage Gains Associated with Height as a Form of Health Human Capital," American Economic Review, American Economic Association, vol. 92(2), pages 349-353, May.
    29. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    30. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    31. Bloom, David E. & Cafiero-Fonseca, Elizabeth T. & McGovern, Mark E. & Prettner, Klaus & Stanciole, Anderson & Weiss, Jonathan & Bakkila, Samuel & Rosenberg, Larry, 2014. "The macroeconomic impact of non-communicable diseases in China and India: Estimates, projections, and comparisons," The Journal of the Economics of Ageing, Elsevier, vol. 4(C), pages 100-111.
    32. Galama, T.J., 2011. "A theory of socioeconomic disparities in health," Other publications TiSEM 0853a390-9356-4944-b8e8-5, Tilburg University, School of Economics and Management.
    33. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    34. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    35. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    36. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-763, Part I Ju.
    37. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    38. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Biswajit Mandal & Prasun Bhattacharjee & Souvik Banerjee, 2018. "Autonomy-induced preference, budget reallocation, and child health," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 485-497, December.
    2. Hiroaki Hayakawa & Yannis P. Venieris, 2019. "Duality in human capital accumulation and inequality in income distribution," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(3), pages 285-310, September.
    3. Bharat Barik, 2024. "Health Shocks, Risk Aversion, and Consumption Choices: Evidence from Household Intoxicant Spending in India During COVID-19," IIMA Working Papers WP 2024-01-02, Indian Institute of Management Ahmedabad, Research and Publication Department.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers 13-170/V, Tinbergen Institute.
    2. Tansel, Aysit & Öztürk, Ceyhan & Erdil, Erkan, 2021. "The Impact of Body Mass Index on Growth, Schooling, Productivity, and Savings: A Cross-Country Study," GLO Discussion Paper Series 929, Global Labor Organization (GLO).
    3. Oscar Erixson, 2017. "Health responses to a wealth shock: evidence from a Swedish tax reform," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(4), pages 1281-1336, October.
    4. Galama, T. & Hullegie, P. & Meijer, E. & Outcault, S., 2012. "Empirical evidence for decreasing returns to scale in a health capital model," Health, Econometrics and Data Group (HEDG) Working Papers 12/05, HEDG, c/o Department of Economics, University of York.
    5. van Kippersluis, Hans & Galama, Titus J., 2014. "Wealth and health behavior: Testing the concept of a health cost," European Economic Review, Elsevier, vol. 72(C), pages 197-220.
    6. Marco Guerrazzi, 2020. "Efficiency-Wage Competition: What Happens as the Number of Players Increases?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(1), pages 13-35, March.
    7. Carl-Johan Dalgaard & Holger Strulik, 2017. "The Genesis of the Golden Age: Accounting for the Rise in Health and Leisure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 132-151, March.
    8. Titus J. Galama & Patrick Hullegie & Erik Meijer & Sarah Outcault, 2012. "Is There Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model?," Health Economics, John Wiley & Sons, Ltd., vol. 21(9), pages 1080-1100, September.
    9. Grossman, Michael, 2006. "Education and Nonmarket Outcomes," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 10, pages 577-633, Elsevier.
    10. Hullegie, P.G.J., 2012. "Essays on health and labor economics," Other publications TiSEM dcc68fc9-7af1-4ba9-8f90-6, Tilburg University, School of Economics and Management.
    11. Galama, Titus & Kapteyn, Arie, 2011. "Grossman’s missing health threshold," Journal of Health Economics, Elsevier, vol. 30(5), pages 1044-1056.
    12. Chavas, Jean-Paul, 2013. "On Demand Analysis and Dynamics: A Benefit Function Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149683, Agricultural and Applied Economics Association.
    13. Julien Hugonnier & Florian Pelgrin & Pascal St‐Amour, 2020. "Closing down the shop: Optimal health and wealth dynamics near the end of life," Health Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 138-153, February.
    14. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2020. "Union, Efficiency of Labour and Endogenous Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 61(2), pages 170-202, December.
    15. Darin Lee & Nicholas G. Rupp, 2007. "Retracting a Gift: How Does Employee Effort Respond to Wage Reductions?," Journal of Labor Economics, University of Chicago Press, vol. 25(4), pages 725-761.
    16. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, December.
    17. Thomas M. Steger, 2000. "Productive Consumption and Growth in Developing Countries," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 365-375, October.
    18. Leonie Sundmacher, 2012. "The effect of health shocks on smoking and obesity," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(4), pages 451-460, August.
    19. Titus Galama & Arie Kapteyn & Raquel Fonseca Benito & Pierre-Carl Michaud, 2009. "Grossman's Health Threshold and Retirement," Working Papers 658, RAND Corporation.
    20. Christopher J. Ruhm, 2006. "Macroeconomic Conditions, Health and Mortality," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, chapter 1, Edward Elgar Publishing.

    More about this item

    Keywords

    Health; Income; Consumption; Investment; Static; Dynamic;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eurase:v:7:y:2017:i:1:d:10.1007_s40822-016-0059-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.