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Computer Based Problem Set- Health Production Function

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Ana Maria Paca Ponce
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15 views2 pages

Computer Based Problem Set- Health Production Function

Uploaded by

Ana Maria Paca Ponce
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Health Production Function (to do in the computer’s lab)

Assume the World Bank hires you as a consultant for investments in the developing
world aimed to increase the welfare of these countries. The World Bank wants to know
which is the best way of investing the money: a) in medical expenses; b) in health
education programs; c) subsidizing medicines.

From your studies in economics you know that the first thing you need to do is
determine the magnitud of the marginal impact of each of these health policies.
Fortunately you have the data from the OECD for 30 countries and you have decided to
use it for your World Bank consultancy.

Data:
The dataset is in Excel or Stata (the data with the extension dta is ready to be read by
Stata). The dataset “data.dta" has the following variables:

Name of the variable Description


Country país
Lef Life expectancy when born 1997, females
Lem Life expectancy when born 1997, males
Infmor96 Infant mortality, 1996
Infmorf97 Infant mortality, 1997
Me96 Medicines expenditure as a % of total health expenses, 1996
Me97 Medicines expenditure as a % of total health expenses, 1997
GDP GDP per capita (at PPP) 1997
He96 Health expenses (except medicines) as a % of GDP, 1996
He97 Health expenses (except medicines) as a % of GDP, 1997
Phe96 Public health expenses (except medicines) as a % of GDP, 1996
Phe97 Public health expenses (except medicines) as a % of GDP, 1997
Tobaco Percentage of the population that smoke regularly in 1997**
alc96 Alcohol consumption in liters per capita, 1996
alc97 Alcohol consumption in liters per capita, 1997
(**The data for the variable tobaco is approximated for those countries without information for 1997)

First you need to estimate the impact of the three policies over alternative measures of
the health stock H (life expectancy when born 1997 (males), life expectancy when born
1997 (females) or Infant mortality 1997) according to the following model:

ln(Hi) = β0 + β1 ln(gdpi) + β2 ln (phe97i) + β3 ln(me97i) + β4 ln(alc97i) + ui

where,

gdpi : GDP per capita (at PPP) 1997


phe97i : public health expenses (except medicines) per capita, 1997
me97i : medicines expenditure as a % of total health expenses, 1997
alc97i : alcohol consumption in liters per capita, 1997
According to the estimated results comment:

1. Which is the impact of each of the policies over the different measures of health
stock? Interpret the coefficients (remember that the variables are expressed in
logs). According to the results, comment which would be the better policy on
average (remember the aim of the World Bank is to know which is the best way
of investing its money: a) in medical expenses; b) in health education programs;
c) subsidizing medicines).

2. Comment which of the inputs has an impact significantly different from zero
over the output and about the fit of the equation to the data.

3. Interpret and comment the results of the marginal effect of “public health
expenses per capita” (phe97) over infant mortality in each country.

4. Do you think this sample of countries is the best one to decide which types of
investments must be carried on in the developing countries in order to improve
the welfare of these countries? Justify your answer.

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