Would You Rather Be Ill Now, or Later?

Abstract:     
The Time Tradeoff (TTO) method is used to calculate the quality adjustment of the Quality Adjusted Life Year, and is therefore an important element in the calculation of the benefits of medical interventions. New specifications of TTO, known as ‘lead time’ TTO and ‘lag time’ TTO, have been developed to overcome methodological issues of the ‘classic’ TTO. In the lead time TTO, ill-health is explicitly placed in the future, after a period of good health, while in lag time TTO a health state starts immediately and is followed by a ‘lag time’ of good health. In this study, we take advantage of these timing properties of lead and lag time TTO. In particular, we use data from a previous study that employed lead and lag time TTO to estimate their implied discounting parameters. We show that individuals prefer being ill later, rather than now, with larger per-period discount rates for longer durations of the health states.

Number of Pages in PDF File: 18

Keywords: TTO, Time preference, discounting, lead time TTO, lag time TTO

JEL Classification: D90, I10

working papers series