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Health and Wealth : How do they Affect Individual Preferences

Author

Listed:
  • Béatrice Rey

    (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

  • Jean-Charles Rochet

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

There is no consensus among health economists about the specification of individual preferences that best fits observed behaviors. One crucial point of disagreement concerns the sign of the interaction between health and wealth in individual utility functions. We propose here a simple, static, model where individuals have only one decision to make concerning their future health ( say to get a flu shot). We derive very simple testable implications that allow to discriminate between three specifications that are commonly used in theoretical models: additive separability between health and consumption, multiplicative separability, and existence of a monetary equivalent of health. We also derive several implications on the pattern of the demand for health insurance.

Suggested Citation

  • Béatrice Rey & Jean-Charles Rochet, 2004. "Health and Wealth : How do they Affect Individual Preferences," Post-Print halshs-03353393, HAL.
    • Handle: RePEc:hal:journl:halshs-03353393
    DOI: 10.1023/b:gepa.0000032565.17805.9d
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    Cited by:

    1. Alberto Bennardo & Salvatore Piccolo, 2014. "Competitive Markets With Endogenous Health Risks," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 755-790, June.
    2. Philippe De Donder & Marie‐Louise Leroux, 2021. "Long term care insurance with state‐dependent preferences," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3074-3086, December.
    3. James Hammitt, 2013. "Admissible utility functions for health, longevity, and wealth: integrating monetary and life-year measures," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 311-325, December.
    4. Attema, Arthur E. & l’Haridon, Olivier & van de Kuilen, Gijs, 2019. "Measuring multivariate risk preferences in the health domain," Journal of Health Economics, Elsevier, vol. 64(C), pages 15-24.
    5. Rachel J. Huang & Larry Y. Tzeng, 2006. "The design of an optimal insurance contract for irreplaceable commodities," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 31(1), pages 11-21, July.
    6. Richard Cookson & Ieva Skarda & Owen Cotton‐Barratt & Matthew Adler & Miqdad Asaria & Toby Ord, 2021. "Quality adjusted life years based on health and consumption: A summary wellbeing measure for cross‐sectoral economic evaluation," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 70-85, January.
    7. Donatella Baiardi & Marco Magnani & Mario Menegatti, 2014. "Precautionary saving under many risks," Journal of Economics, Springer, vol. 113(3), pages 211-228, November.
    8. Christophe Courbage, 2006. "Smoking Behavior and Rank-Dependent Expected-Uitility," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(II), pages 223-230, June.
    9. Caroline Orset, 2024. "The acceptability of the risk of death in the treatment of respiratory diseases in France," Health Economics Review, Springer, vol. 14(1), pages 1-10, December.
    10. Louis Eeckhoudt & Béatrice Rey & Harris Schlesinger, 2007. "A Good Sign for Multivariate Risk Taking," Management Science, INFORMS, vol. 53(1), pages 117-124, January.
    11. Asheim, Geir B. & Emblem, Anne Wenche & Nilssen, Tore, 2010. "Health insurance: Medical treatment vs disability payment," Research in Economics, Elsevier, vol. 64(3), pages 137-145, September.
    12. Mario Menegatti, 2014. "Optimal choice on prevention and cure: a new economic analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 363-372, May.
    13. Christophe Courbage & Richard Peter & Béatrice Rey, 2022. "Incentive and welfare effects of correlated returns," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(1), pages 5-34, March.
    14. Ying He & James S. Dyer & John C. Butler, 2014. "Decomposing a Utility Function Based on Discrete Distribution Independence," Decision Analysis, INFORMS, vol. 11(4), pages 233-249, December.
    15. Jimin Hong & Kyungsun Kim, 2021. "Self-insurance and saving under a two-argument utility framework," Journal of Economics, Springer, vol. 134(1), pages 73-94, September.
    16. Richard Cookson & Owen Cotton-Barrett & Matthew Adler & Miqdad Asaria & Toby Ord, 2016. "Years of good life based on income and health: Re-engineering cost-benefit analysis to examine policy impacts on wellbeing and distributive justice," Working Papers 132cherp, Centre for Health Economics, University of York.
    17. Glenn Sheriff & Kelly B. Maguire, 2020. "Health Risk, Inequality Indexes, and Environmental Justice," Risk Analysis, John Wiley & Sons, vol. 40(12), pages 2661-2674, December.
    18. Mario Menegatti, 2021. "Subsidizing risk prevention," Journal of Economics, Springer, vol. 134(2), pages 175-193, October.
    19. Leiter, Andrea M. & Rheinberger, Christoph M., 2016. "Risky sports and the value of safety information," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 328-345.
    20. Erin T. Mansur & Glenn Sheriff, 2019. "Do Pollution Markets Harm Low Income and Minority Communities? Ranking Emissions Distributions Generated by California's RECLAIM Program," NBER Working Papers 25666, National Bureau of Economic Research, Inc.

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    Keywords

    Disability; Health; Insurance;
    All these keywords.

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