Health Economics.

• Author: Grossman, Michael
• Position: Program Report

The NBER Program in Health Economics focuses on the determinants and consequences of differences in health outcomes. Program members have continued their long-standing interests in such basic determinants of health as substance use, obesity, and formal schooling, but a substantial number have also diversified their portfolios to include the effects of the business cycle, pollution, and overseas military deployment on health outcomes. During the five-year period covered by this report (2010-14), researchers in the program issued 530 working papers, a 36 percent increase relative to the previous five years.

I begin this report by describing research on these new topics, and then turn to those in areas in which the program has a longer history. Given the many working papers that have appeared in the period covered by my report, I can summarize only a small number of them.

The Great Recession and Health

Studies conducted by Christopher Ruhm and others prior to the Great Recession tended to find that health improved during a recession. In a 1996 study, Ruhm pointed to such contributing factors as increases in the amount of time available to exercise, cook at home, and schedule physician visits due to unemployment; less income to purchase cigarettes, alcohol, and junk food; reductions in fatal motor vehicle accidents due to declines in driving; less job-related stress; reductions in pollution associated with lower levels of industrial activity, and expansions in health insurance coverage as low-wage workers who lose their jobs and lack employer-provided health insurance become eligible for Medicaid. (1) He found that a 1 percentage point rise in unemployment led to a 0.5 percent decline in the death rate. Based on these results and similar ones in other studies, Mark L. Egan, Casey B. Mulligan, and Tomas J. Philipson argue that since gross domestic product excludes the value of leisure and the value of health, it overstates the severity of recessions. (2)

A much less rosy picture emerges from research that includes the Great Recession. Using more recent data than that contained in his 1996 study, Ruhm finds that total mortality has shifted over time from being strongly procyclical to being unrelated to macroeconomic conditions. (3) This reflects changes in the behavior of specific causes of death. Fatalities due to cardiovascular disease and motor vehicle accidents continue to be procyclical, while deaths due to cancer and accidental poisonings have become countercyclical. The changing effect of macroeconomic conditions on cancer deaths may be due to the increasing protective effectiveness of financial resources, which can be used to fund sophisticated and expensive treatment that has become available in recent years. The behavior of accidental poisoning deaths may have occurred because declines in mental health during economic downturns are increasingly associated with the use of prescribed or illicitly obtained medications that carry risks of fatal overdoses.

Gregory Colman and Dhaval Dave present results that buttress Ruhm's findings. (4) They show that while becoming unemployed is associated with a small increase in leisure-time exercise, there is a substantial decline in total physical activity. They attribute this to a disproportionate loss of jobs in manual labor, such as construction, during the Great Recession. Hence, even if unemployed people exercised more, they were not as physically active as they had been at work. The upshot was that body weight increased. This may result in long-term reductions in health, since weight gains will not necessarily be reversed once employment is regained. Moreover, due to the concentration of low-educated workers in manual jobs, the recent recession may have exacerbated health differentials between high and low socioeconomic status groups.

Janet Currie and Erdal Tekin present evidence that the housing crisis that accompanied the Great Recession led to worse health outcomes. (5) They find that an increase in the number of housing foreclosures was associated with increases in medical visits for mental health (anxiety and suicide attempts), for preventable conditions (such as hypertension), and for a broad array of physical complaints that are plausibly stress-related. They also find larger effects for African-Americans and Hispanics than for whites, which is consistent with the perception that minorities were hit particularly hard.

All of the studies just mentioned deal with the United States. Tinna Laufey Asgeirsdottir, Hope Corman, Kelly Noonan, Porhildur Olafsdottir, and Nancy E. Reichman show that the health effects of the Great Recession in Iceland may have differed from those in the United States. (6) They find that the recession led to reductions in all health-compromising behaviors and that it led to reductions in certain health-promoting behaviors but increases in others. Many of these effects were due to the reduction of Iceland's real exchange rate, which increased the real prices of tobacco, alcohol, and fruits--all of which are primarily imported.

Not all the health effects experienced by U.S. citizens during the Great Recession were unfavorable. For example, Sara Markowitz, Erik Nesson, and Joshua Robinson report that reductions in labor market activity were associated with a reduced incidence of flu. (7) Jason M. Lindo, Jessamyn Schaller, and Benjamin Hansen find that female lay-offs reduced child abuse, while male layoffs increased it. (8) Given the somewhat conflicting evidence, I suspect that program members will continue to pursue research on the effects of recessions on health for a long time.

Pollution and Health

Reductions in health have well-established negative effects on worker productivity. Tom Chang, Joshua S. Graff Zivin, Tal Gross, and Matthew J. Neidell capitalize on this relationship to study one of the effects of outdoor air pollution: its impact on the productivity and health of indoor workers at a pear-packing factory. (9) They focus on fine particulate matter (PM 2.5), a harmful pollutant that easily penetrates indoor settings. They find that an increase in PM 2.5 outdoors leads to a statistically and economically significant decrease in packing speeds inside the factory, with effects arising at levels well below current air quality standards. In contrast, they find little effect of pollutants that do not travel indoors, such as ozone.

In a related study, Graff Zivin and Neidell exploit a novel panel dataset of daily farm worker output as recorded under piece-rate contracts merged with data on environmental conditions to relate the plausibly exogenous daily variations in ozone with worker productivity. (10) They find robust evidence that ozone levels well below federal air quality standards have a significant impact on productivity. In particular, a 10 parts per billion decrease in ozone concentrations increases worker productivity by 4.2 percent.

Turning to the direct effects of pollution on health, Emmanuelle Lavaine and Neidell examine the effect of energy production on newborn health using a 2010 strike that affected oil refineries in France as a natural experiment. (11) They show that significant reduction in sulfur dioxide (S[O.sup.2]) concentrations caused by the reduction in refining increased birth weight and gestational age of newborns, particularly for those exposed to the strike during the third trimester of pregnancy. Currie, Graff Zivin, Jamie Mullins, and Neidell summarize a good deal of evidence that points to a positive effect of birth weight on such adult outcomes as earnings. (12) Based on that evidence, back-of-the-envelope calculations made by Lavaine and Neidell suggest that a 1 unit decline in S[O.sup.2] leads to a 196 million euro increase in life-time earnings per birth cohort.

In another study dealing with infant health outcomes, Resul Cesur, Tekin, and Aydogan Ulker explore the impact of the widespread adoption of natural gas--a relatively clean, abundant, and highly efficient source of energy--on infant mortality in Turkey. (13) They report that a 1 percentage point increase in the rate of subscriptions to natural gas services would cause the infant mortality rate to decline by approximately 4 percent. This would translate into 357 infant lives saved in 2011 alone.

Graff Zivin and Neidell emphasize that avoidance behavior is an important component for understanding the difference between the biological and behavioral effects of pollution and for proper welfare computations. (14) That is, the total cost imposed on society by pollution consists of the monetary value of the health reductions and the cost of resources employed to reduce or avoid increases in morbidity and mortality. In the case of avoidance behavior generated by poor water quality, Graff Zivin, Neidell, and Wolfram Schlenker estimate that U.S. consumers spent roughly $60 million on bottled water in 2005 specifically to avoid health hazards posed by drinking water violations. (15)

Health of Returning Veterans

Ryan Edwards examines the socioeconomic well-being and health of veterans who were deployed overseas in Iraq or Afghanistan. (16) Deployment includes service in a combat or war zone, exposure to casualties, or both. He finds that the impacts on current socioeconomic well-being may be relatively small, but the effects on self-reported health are negative and substantial. His results are consistent with a veterans'...