Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Question
Chapter 3, Problem 9E
To determine
Check whether the statement is true or false.
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Indicate whether the statement is true or false, and justify your answer.In the framework of the Grossman model, an individual’s level of health is completely controlled by her actions. Thus, in any given period, an individual is unconstrained in her choice of health status.
Indicate whether the statement is true or false, and justify your answer. In the Grossman model, optimal health status declines with age.
Consider that you want to apply the difference-in-differences approach to evaluate the
Health Insurance Subsidy Program (HISP). In this scenario, you have two rounds of data
on two groups of households: one group that enrolled in the program, and another that
did not. You know that you cannot compare the average health expenditures of the two
groups because of selection bias, thus you decide to compare change in health
expenditures as follows:
Table 7.2 Evaluating HISP: Difference-in-Differences Comparison of Means
After
Before
(baseline)
(follow-up)
Difference
Enrolled
7.84
14.49
-6.65
Nonenrolled
22.30
20.79
1.51
Difference
DD = -6.65 – 1.51 = -8.16
Note: The table presents mean household health expenditures (in dollars) for enrolled and
nonenrolled households, before and after the introduction of HISP.
How should you interpret this difference ($USD -8.16)? What are the basic assumptions
required to accept this result from difference-in-differences?
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