George S. Tolley

Valuing health for policy : an economic approach

Preface 1: Overview George Tolley, Donald Kenkel, Robert Fabian. 2: Framework for Valuing Health Risks Mark Berger, Glenn Blomquist, Donald Kenkel, George Tolley. 3: Cost of Illness Approach Donald Kenkel 4: Contingent Valuation of Health Donald Kenkel, Mark Berger, Glenn Blomquist. 5: Household Health Production, Property Values, and the Value of Health Richard Clemmer, Donald Kenkel, Robert Ohsfeldt, William Webb. 6: The Qualy Approach Robert Fabian 7: Issues in Questionnaire Design Robert Fabian, George Tolley. 8: Empirical Results from Household Personal Interviews Michael Brien, Donald Kenkel, Austin Kelly, Robert Fabian. 9: Empirical Results from Mail Questionnaires Wallace Wilson 10: Defining and Measuring Health over Life Lyndon Babcock, Anthony Bilotti. 11: The Quantity and Quality of Life: A Conceptual Framework Sherwin Rosen 12: Modeling of Choices with Uncertain Preferences Charles Kahn 13: Design of Contingent Valuation Approaches to Serious Illness Robert Fabian, Lyndon Babcock, Anthony Bilotti, George Tolley. 14: Future Directions for Health Value Research George Tolley, Robert Fabian. 15: State-of-the-Art Health Values George Tolley, Donald Kenkel, Robert Fabian. 16: The Use of Health Values in Policy George Tolley, Donald Kenkel, Robert Fabian, David Webster. References Contributors Index

Valuing Changes in Health Risks: A Comparison of Alternative Measures*

Essential to efficient provision of health, safety, and the environment is correct valuation of risks to human health. In a world of scarcity difficult decisions concerning tradeoffs between health and other desirables are unavoidable. In this paper we develop a model of health investment under uncertainty which yields a general expression for values of changes in risks to human health. The preference-based values of morbidity risks and mortality risks are ex ante dollar equivalents of changes in expected utility associated with risk changes. The preference-based values are related to two alternative measures, costs of illness and preventive expenditures, which are thought to be lower bounds on the value of risk reductions. We demonstrate that these alternative measures are not even special cases of the more general measure and that the size relationships among the three measures are complex. Also, we derive the relationship between the willingness to pay for risk changes and the consumer surpluses associated with health changes which occur with certainty. The next section contains a brief review of the approaches to valuing changes in health.

The welfare economics of city bigness

Abstract Money wages will vary among cities in an economy with perfect labor mobility, due to differences in costs of producing nontraded goods. Commuting costs contribute to making money wages higher in large cities. Increasing negative technological externalities, such as pollution and congestion, also make money wages higher in larger cities. Such externalities tend to make big cities too big, because marginal is greater than average externality. Internalizing the externalities would be likely to make a city larger if the externalities emanate from production of nontraded goods, but might make the city smaller if the externalities emanate from export production.

Plant Level Productivity, Efficiency, and Environmental Performance of the Container Glass Industry

This paper presents a methodology and empirical results based on theMalmquist productivity index. We measure productivity while treatingpollution as an undesirable output. Our estimates show that technicalchange has contributed to productivity and environmental performancegrowth in the container glass industry, an energy and pollution intensivesector. Changes in inter-plant efficiency over time have made thisproductivity growth more rapid than otherwise would have occurred withthe underlying technical change. The efficiency estimates show that thereare both opportunities to improve productivity and reduce pollution in thisindustry, as well as productivity losses associated with the emissionscontrol. The shadow prices for NOx, the undesirable output we analyze,is quite high compared to other regulated sectors.

The Foreign Dependence Question

An embargo probability leads to private adjustments to curtail consumption and expand production, raising marginal value of consumption less than of production. If there are unemployment or foreign policy externalities, there is an optimal tariff which is proportional to foreign dependence, is inversely proportional to elasticity of external embargo loss, varies directly with embargo probability, and depends more complexly on other parameters. Stockpiling should limit embargo price rise to unit cost of storage divided by embargo frequency. With low embargo frequency, the price rise based on the stockpiling criterion may be greater than with no stockpiling. is then unwarranted.

Recreation Projection Based on Demand Analysis

The first method of projection extends the Hotelling-Clawson model to include population and income as demand shifters. Price, population, and income elasticities of demand for visits to national parks are estimated, leading to projections of a 225-percent increase in visits by 1980. Partly because this method does not consider the distribution of income, a second method is developed based on visitation rates by distance-income-vacation classes. To project future population by income classes, maximum-likelihood estimators are developed of the mean and variance of the log-normal component of a states income distribution. The second method is applied to an area recreation complex in western North Carolina and to recreation packages within the area. It suggests a more rapid increase in visits than the first method, due to projected rise in the proportion of the population in upper-income-vacation classes, which have high visitation rates.

Approximate aggregation and error in input-output models

Abstract Each industry in an input-output model is an aggregate of related, but not identical, production processes. As a result, the industrys input-output coefficients and demand multipliers are averages over the underlying disaggregated parameters. We provide a method for disaggregating an input-output model to obtain more precise estimates of its demand multipliers. This method is then applied to the problem of estimating the sensitivity of the demand multipliers to aggregation errors in the input-output matrix. We prove a theorem which provides upper bounds on the variances of aggregation errors in the multiplier matrix in terms of the variances of errors in the input-output matrix.

Technology Adoption and Agricultural Price Policy

Market interventions such as price supports or fertilizer subsidies can lead to gains from speeding up adoption of new technologies, but the policies distort resource allocation. A framework is developed for optimizing policies in light of the adoption-allocation trade off. Based on adoption coefficients and production parameters from third world agriculture, levels and duration of policies are estimated. Sensitivity analyses are performed. Gains are small at best and may be zero or negative in view of farmer costs of adjustment and deadweight losses from taxes.

The Interdependence between Income and Education

Using single-equation approaches, previous studies concerned with human capital indicate that education expenditures have a large effect on income. Previous studies concerned with local government behavior indicate that income has a large effect on education expenditures. There is the possibility that essentially the same relationship is being measured, with dependent and independent variables merely interchanged. In this study, the equations are estimated simultaneously. To see why single- and simultaneous-equations estimates differ, expressions are developed for sources of single-equation bias.The major reason for a large single-equation bias in estimating the effect of education on income is found to be the relatively large reverse effect of income on education, which makes for high correlation between independent variable and residual in the equation for income. Single-equation bias in the equation explaining education expenditures is small for the same underlying reason, namely the reverse effect occurring in the equation is relatively small. A by-product is an analysis of demand for education allowing for effects of different forms of wealth, in contrast to the usual approach assuming one overall wealth or income effect. Nonhuman wealth is estimated to have twice as much effect on education expenditures as other forms of wealth.

Management Entry Into U.S. Agriculture

The view that agriculture is undergoing replacement of one kind of human capital by another is offered as alternative to the traditional view that resources are chronically oversupplied to farming. The hypothesis that high level management farms have experienced favorable cost curve shifts explains farm number declines as primarily replacement of many low management by fewer high management farms. The replacement raises efficiency modestly. Occupational supply behavior relations for management levels lead to inferences about income distribution and future structure of agriculture. A price-income policy is suggested to compensate outmoded management for obsolescence.