The Economic Value of Eliminating Diseases

Abstract

We develop a framework to quantify the welfare gains of reducing health risks. The framework integrates causal effect estimates of health shocks on medical expenses, mortality, disability, labor market participation, earnings, and the need for nursing home care into a life cycle model. Economic benefits reflect both individuals' willingness-to-pay to reduce a particular health risk and net effects on government finances. We apply our framework to Dutch administrative data on medical diagnoses of 6.9 million people and 334 distinct medical diagnoses. Our estimates show that curing cancer or cardio-vascular diseases would result in economic benefits equivalent to 9.5% and 9.1% of the GDP. The corresponding estimates for preventive measures such as eradicating smoking or preventing overweight and obesity are 7.7% and 5.6%.

Keywords: health shocks, life cycle, health economics, public health expenditure.

JEL Classification: D15, D60, G50, H51, I10