Walter Ried

Bio: Walter Ried is an academic researcher from University of Mannheim. The author has contributed to research in topics: Health care & Health economics. The author has an hindex of 7, co-authored 15 publications receiving 265 citations.

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

Abstract: 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.

Willingness to pay and cost of illness for changes in health capital depreciation

Abstract: The paper investigates the relationship between the willingness to pay and the cost of illness approach with respect to the evaluation of economic burden due to adverse health effects. The basic intertemporal framework is provided by Grossman's pure investment model, while effects on individual morbidity are taken to be generated by marginal changes in the rate of health capital depreciation. More specifically, both the simple example of purely temporary changes and the more general case of persistent variations in health capital depreciation are discussed. The analysis generates two principal findings. First, for a class of identical individuals cost as measured by the cost of illness approach is demonstrated to provide a lower bound on the true welfare cost to the individual, i.e. cost as given by the willingness to pay approach. Moreover, the cost of illness is increasing in the size of the welfare loss. Second, if one takes into account the possible heterogeneity of individuals, a clear relationship between the cost values supplied by the two approaches no longer exists. As an example, the impact of variations in either financial wealth or health capital endowment is discussed. Thus, diversity in individual type turns out to blur the link between cost of illness and the true economic cost.

Estimation and Inference in Econometrics

Abstract: 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.

The Human Capital Model

Abstract: 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.

Education and Nonmarket Outcomes

Abstract: 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.

Cost-effectiveness analysis and the consistency of decision making: evidence from pharmaceutical reimbursement in australia (1991 to 1996).

Abstract: Objective: The principle aim of this study was to generate a league table of drugs considered by the Australian Pharmaceutical Benefits Advisory Committee (PBAC) for reimbursement. The table was used to test the hypothesis that decisions made by the PBAC are consistent with the maxim of economic efficiency. In addition, we explored whether the past decisions by the PBAC revealed a threshold incremental cost-effectiveness ratio beyond which the PBAC is not prepared to recommend reimbursement of a drug. Methods: All 355 submissions made to the PBAC between January 1991 and June 1996 were reviewed. Submissions using cost per life-year gained (26 submissions) or the cost per quality adjusted life-year (QALY) gained (9 submissions) were ranked in a league table and compared with advice given by the PBAC about that drug. The confidentiality restrictions for the submissions require that the individual drug details cannot be revealed in this article. Results: There was a statistically significant difference between the cost per life-year gained for drugs that were recommended for listing and those that were not, suggesting that the PBAC has been broadly consistent with the use of economic efficiency as a criterion for decision making. We did not find an explicit threshold beyond which the PBAC was unwilling to pay for additional life years gained. However, between 1992 and 1996 the PBAC appears to have been unlikely to recommend a drug for listing if the additional cost per life-year exceeded 76 000 Australian dollars [$AU] (1998/1999 values) and was unlikely to reject a drug for which the additional cost per life-year gained was less than $AU42 000. The cost-effectiveness ratio was not the only factor determining the reimbursement decision. Conclusions: The results of this preliminary study indicate that decisions to recommend a drug for listing by the PBAC in the last few years have, by and large, been consistent with the notion of economic efficiency.

Cost-of-illness studies: a guide to critical evaluation.

Abstract: Cost-of-illness (COI) studies aim to assess the economic burden of health problems on the population overall, and they are conducted for an ever widening range of health conditions and geographical settings. While they attract much interest from public health advocates and healthcare policy makers, inconsistencies in the way in which they are conducted and a lack of transparency in reporting have made interpretation difficult, and have ostensibly limited their usefulness. Yet there is surprisingly little in the literature to assist the non-expert in critically evaluating these studies. This article aims to provide non-expert readers with a straightforward guide to understanding and evaluating traditional COI studies. The intention is to equip a general audience with an understanding of the most important issues that influence the validity of a COI study, and the ability to recognize the most common limitations in such work.