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  • Author: Rok Hren x
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Theoretical shortcomings of the Grossman model

This article contains a review of the seminal Grossman model from a perspective of assumptions and simplifications, which were necessary to make the model tractable. The Grossman model emphasises health as a fundamental commodity, which implies that the demand for healthcare is a derived demand; in the model, individuals are both consumers and producers of health. The model predicts that an individual would invest in health until the marginal benefit of health equals its marginal cost; this equilibrium demand for health entails that the length of an individual's life would be determined endogenously. This review also discusses the model's refinements and extensions that have relaxed some of the constraints of the original model. In spite of its shortcomings, the Grossman model remains — even after 40 years — one of the few models in the realm of health economics, which attempts to conceptualise the complex demand for health and healthcare both theoretically and empirically.


Background and Purpose: Chronic diseases and associated co-morbidities are highly prevalent among elderly and are associated with an increase in health services utilization which in turn raises health care expenditures throughout industrialized societies. However, health care utilization in elderly is still inadequately understood, particularly regarding the differences among European jurisdictions. In our article, we use dataset of Wave 5 of SHARE survey to study the utilization of health care in older Europeans in 15 European countries.

Design/Methodology/Approach: We investigate relationships between factors such as age, gender, income, education and health variables and the utilization of various types of health services. We apply regression modeling to study the determinants of health utilization (different socioeconomic and health variables) of older people.

Results: We show some significant differences between determinants of health utilization in terms of probability and frequency of usage. We also explore patterns between welfare regimes, taking Eastern European jurisdictions as a reference category. Finally, we show that in a simple causal model the provision of formal and/or informal homecare serves as a complement to utilization of health care services.

Conclusion: Results of our article are important for the management of health care facilities in terms of health care usage by older people, and can be of value to health care providers and policy makers in the field.