Reference no: EM132194146
Labour and Health Economics Assignment -
Section 1. True/False/Uncertain Questions
Q1. The finding of a negative relationship between an individual's daily hours worked and daily wage violates the predictions of the standard labour supply model.
Q2. A same amount of decrease in the market wage rate will cause a larger increase in the amount of labour demanded in the short run than in the long run.
Q3. The distinction between policy implications of human capital and signalling models arises because while schooling model assumes a positive correlation between years of schooling and earnings it is not the case for the signalling model.
Q4. Price does not influence healthcare utilisation decisions.
Q5. Lifestyle is a very important determinant of health, but it does not necessarily mean that public health campaigns aiming at improving individuals' lifestyle are effective in improving health.
Section 2. Numerical Problems
Q6. Assume an individual has a utility function of this form
U(C, L) = 6 + CxL
This utility function implies that the individual's marginal utility of leisure is C and her marginal utility of consumption is L. The individual has an endowment of V in non-labor income and T = 16 hours to either work (h) or use for leisure (L).
a) How much utility does the individual receive if she consumes C = 4 and works h = 6 hours?
b) Write down and graphically indicate the budget constraint of the individual.
c) Assume the price of each unit of consumption good p = 2 and the wage rate for each hour of work w = 1, and V = 0. What is the optimal amount of consumption and leisure?
d) Assume a cash grant welfare program is instituted which pays M = 6 dollars for individuals who do not work. Compute the new optimal labour supply for this individual under the welfare program. Assume that prior to the welfare program, p = 2, w = 1, and V = 0 (as in part c). Does the individual accept the welfare program and not work? Show why or why not.
Q7. Assuming no health insurance is available, the annual demand for general practice (GP) services by the retiree population is summarized by the demand function:
Qd = 10000 - 100P
a. Graph the demand curve. What is the quantity demanded for medical services from this retiree group if P=$40 (doctor's fee per visit=$40)?
b. Suppose the government introduces a social insurance scheme, called Medicare. Under such a scheme, the government offers to pay 100% of the doctor fee if the fee does not exceed $40 and $40 if the fee exceeds $40. Derive the new demand and add the new demand curve to the existing graph. How does the new demand curve compare with the old demand curve?
c. Calculate the quantity demanded and the associated cost of the Medicare program to the government under the Medicare scheme described in part (b) when i) P=$40 and ii) P=$50.
Section 3. Essay Questions
Q8. Why do we care about the rate of return to education? Describe in your own words the theoretical models of schooling decisions and their policy implications. Explain also the empirical approaches and the difficulties in estimating the rate of return to education?
Q9. Discuss the main findings of the hospital efficiency studies. To what extent can the government reduce healthcare costs by attempting to improve inefficient hospitals? Discuss also the main findings of cost studies. Can the government reduce healthcare costs by encouraging existing hospitals to merge?