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Money for Health: The Compensating Variation of Cardiovascular Diseases

24 Pages Posted: 31 Jan 2003  

Wim Groot

University of Maastricht; University of Amsterdam

Henriette Maassen van den Brink

University of Amsterdam

Erik Plug

University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute; IZA Institute of Labor Economics

Date Written: November 2002

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.

Keywords: Compensating Income Variations, Cardiovascular Disease, Subjective Income Evaluation

JEL Classification: I10, I12

Suggested Citation

Groot, Wim and Maassen van den Brink, Henriette and Plug, Erik, Money for Health: The Compensating Variation of Cardiovascular Diseases (November 2002). IZA Discussion Paper No. 653. Available at SSRN: https://ssrn.com/abstract=371622

Wim Groot

University of Maastricht ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

University of Amsterdam

Spui 21
Amsterdam, 1018 WB
Netherlands

Henriette Maassen van den Brink

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands
+31 020 525 4311/4288 (Phone)

HOME PAGE: http://www1.fee.uva.nl/scholar/mdw/hmvdb/main.htm

Erik Plug (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 5254311 (Phone)
+31 20 5254310 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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