IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp653.html
   My bibliography  Save this paper

Money for Health: The Compensating Variation of Cardiovascular Diseases

Author

Listed:
  • Groot, Wim

    (Maastricht University)

  • Maassen van den Brink, Henriette

    (University of Amsterdam)

  • Plug, Erik

    (University of Amsterdam)

Abstract

This paper introduces a new method to calculate the extent to which individuals are willing to trade money for improvements in their health status. An individual welfare function of income (WFI) is applied to calculate the compensating income variation of health impairments. We believe that this approach avoids various drawbacks of alternative willingness-to-pay methods. The WFI is used to calculate the compensating variation of cardiovascular diseases. It is found that for a 25-year old male the compensating variation of a heart disease ranges from 160,000 Euro to 430,000 Euro depending on the welfare level. This is about 8,000 to 32,000 Euro for an additional life year, depending on the quality of life. The compensating variation declines with age and is lower for women than for men. The estimates further vary by the discount rate chosen. The estimates of the compensating variation are generally higher than the money spent on heart related medical interventions per QALY.

Suggested Citation

  • Groot, Wim & Maassen van den Brink, Henriette & Plug, Erik, 2002. "Money for Health: The Compensating Variation of Cardiovascular Diseases," IZA Discussion Papers 653, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp653
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp653.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Buyze, Jeannine, 1982. "The estimation of welfare levels of a cardinal utility function," European Economic Review, Elsevier, vol. 17(3), pages 325-332.
    2. Ada Ferrer-i-Carbonell & Bernard M.S. van Praag, 2002. "The Subjective Costs of Health Losses due to Chronic Diseases," Tinbergen Institute Discussion Papers 02-023/3, Tinbergen Institute.
    3. van de Stadt, Huib & Kapteyn, Arie & van de Geer, Sara, 1985. "The Relativity of Utility: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 179-187, May.
    4. Erik J.S. Plug & Bernard M.S. Van Praag, 1995. "Family Equivalence Scales within a Narrow and Broad Welfare Context," Journal of Income Distribution, Ad libros publications inc., vol. 4(2), pages 1-1, December.
    5. Van Herwaarden, Floor G. & Kapteyn, Arie, 1979. "Empirical comparison of the shape of welfare functions," Economics Letters, Elsevier, vol. 3(1), pages 71-76.
    6. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 11(3), pages 337-369.
    7. van de Stadt, H. & Kapteyn, A.J. & van de Geer, S., 1983. "The relativity of utility : Evidence from panel data," Other publications TiSEM f8308b3a-9c49-4ba2-8ce3-7, Tilburg University, School of Economics and Management.
    8. Plug, Erik J. S. & Van Praag, Bernard M. S., 1998. "Similarity in response behavior between household members: An application to income evaluation," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 497-513, August.
    9. Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326, June.
    10. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
    11. Plug, Erik J. S. & van Praag, Bernard M. S. & Hartog, Joop, 1999. "If we knew ability, how would we tax individuals?," Journal of Public Economics, Elsevier, vol. 72(2), pages 183-211, May.
    12. repec:bla:revinw:v:31:y:1985:i:2:p:139-54 is not listed on IDEAS
    13. Aldi J. M. Hagenaars & Bernard M. S. van Praag, 1985. "A Synthesis Of Poverty Line Definitions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(2), pages 139-154, June.
    14. van Hout, Ben & Bonsel, Gouke & Habbema, Dik & van der Maas, Paul & de Charro, Frank, 1993. "Heart transplantation in the Netherlands; costs, effects and scenarios," Journal of Health Economics, Elsevier, vol. 12(1), pages 73-93, April.
    15. Ada Ferrer‐i‐Carbonell & Bernard M.S. van Praag, 2002. "The subjective costs of health losses due to chronic diseases. An alternative model for monetary appraisal," Health Economics, John Wiley & Sons, Ltd., vol. 11(8), pages 709-722, December.
    16. van Praag, Bernard & Goedhart, Theo & Kapteyn, Arie, 1980. "The Poverty Line-A Pilot Survey in Europe," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 461-465, August.
    17. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
    18. Van Praag, Bernard M.S. & Warnaar, Marcel F., 1997. "The cost of children and the use of demographic variables in consumer demand," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 6, pages 241-273, Elsevier.
    Full references (including those not matched with items on IDEAS)

    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. Wim Groot & Henriëtte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872, September.
    2. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 35-60, March.
    3. Kijazi, Martin Herbert & Kant, Shashi, 2011. "Evaluation of welfare functions of environmental amenities: A case of forest biomass fuels in Mount Kilimanjaro, Tanzania," Ecological Economics, Elsevier, vol. 72(C), pages 129-139.
    4. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    5. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
    6. Bernard M. S. van Praag & Barbara E. Baarsma, 2005. "Using Happiness Surveys to Value Intangibles: The Case of Airport Noise," Economic Journal, Royal Economic Society, vol. 115(500), pages 224-246, January.
    7. Amiel, Yoram, 1998. "The subjective approach to the measurement of income inequality," LSE Research Online Documents on Economics 6595, London School of Economics and Political Science, LSE Library.
    8. Paul Frijters & Bernard M.S. van Praag, 1998. "Climate equivalence scales and the effects of climate change on Russian welfare and well-being," School of Economics and Finance Discussion Papers and Working Papers Series 055a, School of Economics and Finance, Queensland University of Technology.
    9. van Praag, B. M. S. & Frijters, P. & Ferrer-i-Carbonell, A., 2003. "The anatomy of subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 51(1), pages 29-49, May.
    10. Bernard M.S. van Praag, 2004. "The Connexion Between Old and New Approaches to Financial Satisfaction," CESifo Working Paper Series 1212, CESifo.
    11. Kapteyn, A. & Kleinjans, K. & van Soest, A.H.O., 2008. "Intertemporal Consumption with Directly Measured Welfare Functions and Subjective Expectations," Other publications TiSEM 29e581de-6037-463c-b441-7, Tilburg University, School of Economics and Management.
    12. Arie Kapteyn & James P. Smith & Arthur Van Soest, 2009. "Comparing Life Satisfaction," Working Papers WR-623-1, RAND Corporation.
    13. Caporale, Guglielmo Maria & Georgellis, Yannis & Tsitsianis, Nicholas & Yin, Ya Ping, 2009. "Income and happiness across Europe: Do reference values matter?," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 42-51, February.
    14. Arie Kapteyn & Peter Kooreman & Rob Willemse, 1988. "Some Methodological Issues in the Implementation of Subjective Poverty Definitions," Journal of Human Resources, University of Wisconsin Press, vol. 23(2), pages 222-242.
    15. Bernard M. S. Praag, 2020. "Pioneer in QOL Research: Van Praag," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 15(4), pages 1247-1250, September.
    16. Kapteyn, Arie, 1994. "The Measurement of Household Cost Functions: Revealed Preference versus Subjective Measures," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(4), pages 333-350, November.
    17. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    18. MatthewD. Rablen, 2008. "Relativity, Rank and the Utility of Income," Economic Journal, Royal Economic Society, vol. 118(528), pages 801-821, April.
    19. Kapteyn, A. & Smith, J.P. & van Soest, A.H.O., 2011. "Are Americans Really Less Happy With Their Incomes?," Other publications TiSEM 9c4b1732-54e6-4344-a3e7-b, Tilburg University, School of Economics and Management.
    20. Dagsvik, John K. & Strom, Steinar & Jia, Zhiyang, 2006. "Utility of income as a random function: Behavioral characterization and empirical evidence," Mathematical Social Sciences, Elsevier, vol. 51(1), pages 23-57, January.

    More about this item

    Keywords

    subjective income evaluation; cardiovascular disease; compensating income variations;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:iza:izadps:dp653. 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: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    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.