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Grossman's Missing Health Threshold

Titus Galama, Arie Kapteyn

Published May 26, 2009

The authors present a generalized solution to Grossman's model of health capital (1972), relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an “optimal” level without adjustment costs. The Grossman model then predicts the existence of a health threshold above which individuals do not demand medical care. Their generalized solution addresses a significant criticism: the model's prediction that health and medical care are positively related is consistently rejected by the data. They suggest structural and reduced form equations to test their generalized solution and contrast the predictions of the model with the empirical literature.

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Document Details

  • Copyright: RAND Corporation
  • Availability: Web-Only
  • Year: 2009
  • Pages: 42
  • Document Number: WR-684

Citation

RAND Style Manual
Galama, Titus and Arie Kapteyn, Grossman's Missing Health Threshold, RAND Corporation, WR-684, 2009. As of September 26, 2024: https://www.rand.org/pubs/working_papers/WR684.html
Chicago Manual of Style
Galama, Titus and Arie Kapteyn, Grossman's Missing Health Threshold. Santa Monica, CA: RAND Corporation, 2009. https://www.rand.org/pubs/working_papers/WR684.html.
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