Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.

Estimation and Inference in Econometrics

This chapter contains a detailed treatment of the human capital model of the demand for health which was originally developed in 1972. Theoretical predictions are discussed, and theoretical extensions of the model are reviewed. Empirical research that tests the predictions of the model or studies causality between years of formal schooling completed and good health is surveyed. The model views health as a durable capital stock that yields an output of healthy time. Individuals inherit an initial amount of this stock that depreciates with age and can be increased by investment. The household production function model of consumer behavior is employed to account for the gap between health as an output and medical care as one of many inputs into its production. In this framework the “shadow price” of health depends on many variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education (years of formal schooling completed) if more educated people are more efficient producers of health. An important result is that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded.

The Human Capital Model

This chapter explores the effects of education on nonmarket outcomes from both theoretical and empirical perspectives. Examples of outcomes considered include general consumption patterns at a moment in time, savings and the rate of growth of consumption over time, own (adult) health and inputs into the production of own health, fertility, and child quality or well-being reflected by their health and cognitive development. They are distinguished from the labor market outcomes of education in terms of higher earnings and wage rates. The focus is on identifying causal effects of education and on mechanisms via which these effects operate. The chapter pays a good deal of attention to the effects of education on health for a variety of reasons. They are the two most important sources of human capital: knowledge capital and health capital. They interact in their levels and in the ways they affect the cost and usefulness of the other. There is a large literature addressing the nature of their complementarities. While each affects the production and usefulness of the other, there are important dynamics of their interaction, seen in the age-structure of the net and gross production of the two. This sequencing also affects their optimal amounts. In the conceptual foundation section, models in which education has productive efficiency and allocative efficiency effects are considered. These frameworks are then modified to allow for the endogenous nature of schooling decisions, so that observed schooling effects can be traced in part to omitted "third variables" such as an orientation towards the future. An additional complication is that schooling may contribute to a future orientation in models with endogenous preferences. The empirical review provides a good deal of evidence for the proposition that the education effects are causal but is less conclusive with regard to the identification of specific mechanisms.

Education and Nonmarket Outcomes

The autoregressive model for cointegrated variables is analyzed with respect to the role of the constant and linear terms. Various models for 1(1) variables defined by restrictions on the deterministic terms are discussed, and it is shown that statistical inference can be performed by reduced rank regression. The asymptotic distributions of the test statistics and estimators are found. A similar analysis is given for models for 1(2) variables with a constant term.

The role of the constant and linear terms in cointegration analysis of nonstationary variables : Cointegrated systems. I

This paper contains a detailed treatment of the human capital model of the demand for health. Theoretical predictions are discussed, and theoretical extensions are reviewed. Empirical research that tests the predictions of the model or studies causality between years of formal schooling completed and good health is surveyed. The model views health as a durable capital stock that yields an output of healthy time. Individuals inherit an initial amount of this stock that depreciates with age and can be increased by investment. The household production function model of consumer behavior is employed to account for the gap between health as an output and medical care as one of many inputs into its production. In this framework the shadow price' of health depends on many variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education if more educated people are more efficient producers of health. An important result is that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded.

/pdf/the-human-capital-model-of-the-demand-for-health-2zt4rf0m08.pdf

The Human Capital Model of the Demand for Health

The paper develops and applies a Grossman-style health production model set up in discrete time to explain the impact of environmental pollution on the demand for both health and health care. In order to introduce the environment, our analysis takes changes in environmental conditions to influence the rate at which an individual's stock of health depreciates. While the theoretical part of our paper also contains a discussion of the full model, we restrict our empirical analysis to a submodel which is known as the pure investment model. This is because the other submodel, the pure consumption model, implies a rather implausible case of satiation with respect to the individual's preferences.



Our empirical findings are based on data taken from the German Socio-economic Panel. The stock of health capital and environmental pollution are treated as latent variables and estimated using a Linear Covariance Structures model. The quality of the environment turns out to be an important determinant of health capital. From the point of view of health economics, improvements in environmental conditions can be interpreted as preventive measures. In terms of prevention, public policies designed to protect the environment also yield significant health effects. As regards health care demand the influence is not clearcut, i.e., one cannot necessarily expect a reduction in resource use.

/pdf/health-health-care-and-the-environment-econometric-evidence-2gflp45tpy.pdf

Health, Health Care, and the Environment : Econometric Evidence from German Micro Data

Health, health care and the Environment

The German population is aging. Since fewer children are born and simultaneously life expectancy rises, demographic changes will lead to a double aging process. The paper analyzes the effects of demographic changes on national debt and the public budget by applying a cointegration analysis to global budget variables. Our procedure which covers the period between 1950 and 1990 completes prevailing projections, emphasizing that low vital rates are not the basic problem but the long-run trend of decreasing fertility and mortality rates. The estimation results of several error- correction models show that in the long-run an increase in the old age dependency ratio, and a decrease in the reproduction rate will lead to higher public expenditures. As regards public revenue, the results are ambivalent. The change in the age structure results in higher tax revenue, whereas the decline of population has the opposite effect. Furthermore, we find empirical evidence that aging increases the debt ratio. This development counters current efforts to reduce the public debt share of production potential and the tax load ratio. As a consequence, more action is needed to improve Germany's competiveness as a business location. Compared to these long-run effects, the short-run dynamics is only of minor importance. Significant parameter estimates can be found mainly in the model for the social security contribution rate.

https://www.econstor.eu/bitstream/10419/48926/1/242673961.pdf

Short-run dynamics and long-run effects of demographic change on public debt and the budget

Finanzwirtschaftliche und strukturelle Entwicklungen in der Pflegeversicherung vor dem Hintergrund des demographischen Wandels bis zum Jahr 2040 : Expertise für die Enquete-Kommission "Demographischer Wandel" des Deutschen Bundestages, Mannheim 1998

Manfred Erbsland

Papers

Health, Health Care, and the Environment : Econometric Evidence from German Micro Data

Health, health care and the Environment

Short-run dynamics and long-run effects of demographic change on public debt and the budget

Finanzwirtschaftliche und strukturelle Entwicklungen in der Pflegeversicherung vor dem Hintergrund des demographischen Wandels bis zum Jahr 2040 : Expertise für die Enquete-Kommission "Demographischer Wandel" des Deutschen Bundestages, Mannheim 1998

Die Auswirkungen der Bevölkerungsstruktur auf Ausgaben und Beitragssatz der gesetzlichen Krankenversicherung