This study, titled “Grossman’s Generalised Health Demand Model: An Application on Türkiye,” by Oğuz Kara, was published in 2024 in the İzmir İktisat Dergisi / İzmir Journal of Economics, Volume 39, Number 3, on pages 806-821. It focuses on the health demand of individuals in Türkiye, referencing Grossman’s pioneering health demand model, which views health as both a consumption good that directly contributes to individual benefit and an investment good that increases productive time and human capital. Individuals are born with a certain health heritage that depreciates over time but can be replenished through investment. The article mathematically models this effort to restore worn-out health stock.
The research aimed to examine the medical care demand of individuals and the impact of human capital components on their general health status. Using 2016 and 2019 health research micro datasets from Türkiye (TUIK), the study analyzed data from 25,825 individuals. Two distinct models were employed for the analysis. The first model investigated the demand for medical care, with the dependent variable being the number of applications individuals made for family physicians, specialist physicians, outpatient, or inpatient services. Explanatory variables included 15 different chronic diseases, such as asthma, diabetes, and heart disease, along with various obesity stages based on Body Mass Index (BMI). A negative binomial regression model was utilized for this analysis, chosen due to overdispersion in the count data, demonstrating its superiority over the Poisson regression model based on goodness-of-fit statistics. The second model focused on the investment aspect of health, using the individual’s general health status as the dependent variable, categorized into five levels from “very poor” to “very good”. Independent variables included human capital indicators such as education level and household income, as well as age, weekly walking minutes for exercise, and the total number of chronic diseases. Ordered logit regression was applied for this model, as the dependent variable was categorical and ordinal.
The findings from the first model (Medical Care Demand) confirmed Grossman’s hypothesis: individuals with chronic diseases are more likely to seek medical care to compensate for their deteriorating health stock. Specifically, individuals with stroke were found to be 1.87 times more likely to receive medical care, those with kidney disease 1.44 times more likely, and those with diabetes 1.36 times more likely, compared to individuals without these conditions. Conversely, conditions like obesity (BMI 30-34.9, 1.06 times more likely), neck region pain (1.17 times more likely), and bronchitis (1.19 times more likely) had the least significant impact on the number of services received.
For the second model (General Health Status), the results largely aligned with Grossman’s health investment model, emphasizing that self-investment can improve health status. The analysis concluded that an improvement in income level is likely to improve general health status by 0.89 times, and an increase in education level is associated with a 0.83 times improvement. Similarly, an increase in weekly walking minutes (exercise) was found to improve general health status by 0.99 times. Additionally, individuals covered by health insurance (SGK) showed a 0.78 times improvement in their health status. On the other hand, factors that tended to worsen general health status included an increase in age, which was likely to decrease health status by 1.03 times, and an increase in the total number of chronic diseases, which tended to decrease health status by 1.84 times.
Despite its influential nature, Grossman’s model faces several criticisms. It fails to explain sudden health stock erosion caused by stochastic shocks like suicide, injury, or traffic accidents. The model also neglects the crucial link between early life health (in the womb, infancy, and childhood) and the development of adult chronic diseases. While primarily attributing health depreciation to age, the model overlooks the significant impact of lifestyle choices such as alcohol, smoking, and drug use. Furthermore, it views individuals as isolated health producers, failing to account for the influence of social groups on health-seeking behavior. The assumption of full rationality in individuals is considered an overly mechanical interaction. The model treats wages and education as external and constant variables, ignoring how diseases can affect wage levels or how early health problems can influence lifelong socio-economic conditions. It also doesn’t consider the effects of initial health stock inequalities on lifetime income and education. Crucially, the model was built under the assumption of no health insurance, despite the strong empirical link between health insurance and healthcare demand due to unpredictable costs.
Nevertheless, Grossman’s model remains a pioneering and highly influential theoretical framework that first economically explained health-related decision-making. It provides a strong theoretical justification for individuals’ health claim behavior and has guided numerous applied studies globally. Its basic framework offers a wide perspective for future health demand research, adaptable with advancements in econometric methods and health databases. The empirical findings of this study, utilizing a large-scale dataset, confirm the validity of Grossman’s health demand model in the context of Türkiye, aligning with similar results from other countries.
Based on these findings, the study proposes several policy implications for Türkiye. Investing in and improving the education system is crucial, as more educated individuals tend to be more conscious and healthier. Integrating health knowledge into school curricula, particularly at basic education levels, is suggested. Policymakers should also focus on strengthening health infrastructure, increasing health personnel and equipment, and facilitating access to health services. Developing diverse financing models, including public-private partnerships, can enhance healthcare access and alleviate the public sector’s financial burden. Furthermore, developing culturally sensitive health policies that respect the health beliefs and practices of various cultural groups is important. To address the finding that higher-income individuals are generally healthier, policies should focus on improving individual income status, increasing national income per capita, and funding policies to eliminate income inequality. Creating new business opportunities, especially for underemployed groups like women and disabled people, is also recommended. Lastly, increasing the number of publicly accessible areas is suggested to encourage and make sports habits more attractive for individuals, thereby promoting physical activity.
Reference: Kara, O. (2024). Grossman’s generalised health demand model: an application on Türkiye. İzmir İktisat Dergisi, 39(3), 806-821. Doi: 10.24988/ije.1466447
