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My dissertation investigates how individuals make tradeoffs between consumption and health risks, and the implications of their choices for the efficiency and equity of public policies. I study how these decisions can be used to infer their willingness to pay to reduce health risks, as well as the implications for dynamic complementarities between the quantity and the quality of life, and how decisions on health behavior affect educational attainment and workplace performance. Chapter 1 provides a brief preview of how I formalize these ideas, test them using micro data, and consider their policy implications in three interconnected essays. In Chapter 2 I provide the first revealed preference evidence on the willingness to pay to reduce mortality risks by US senior citizens. I derive this evidence from the rates at which they consume medical services and the effects of their choices on survival probabilities. Instrumental variable estimates provide robust evidence that their Value of a Statistical Life (VSL) is well below \$1 million and declines with age. Conditional on age, the VSL increases in health, income, education and is higher for women and for people who never smoked. Chapter 3 develops a unified framework for valuing changes in health and longevity that explicitly allows for the complementarities between quantity and quality of life. I develop a dynamic life-cycle model of health investment, stochastic health and mortality, and use the model to characterize the VSL and the value of disease prevention for seniors. My results reinforce the qualitative variation in VSL with respect to age, health and income described in Chapter 2. I also document evidence of dynamic complementarity that implies there is increasing returns to health improvements. To demonstrate the policy implications of this complementarity, I use my calibrated model to calculate the benefits of mortality reductions in the 2000's that the US Environmental Protection Agency attributed to the Clean Air Act. I find that these mortality reductions generated benefits, in part, by increasing the value of further health risk reductions due to increased life expectancy. The value of this improvement was equivalent to 6\% of the total benefit of the Clean Air Act in 2010. In Chapter 4 I investigate the causal effect of depression on illicit drug use among young adults. Using the 9/11 terrorist attack as an instrument for depression, I show that depression triggers illicit drug use among young adults (age 18-28) with heterogeneous impacts on different drugs. This finding suggests that treating depression can help to reduce illicit drug use. Dynamic complementarity in health improvements therefore, imply that there are likely to be positive externalities from the Affordable Care Act and other policies that increase insurance coverage for mental health.
ContributorsSaha, Nirman (Author) / Kuminoff, Nicolai N (Thesis advisor) / Ketcham, Jonathan J (Committee member) / Silverman, Daniel D (Committee member) / Veramendi, Gregory G (Committee member) / Arizona State University (Publisher)
Created2021