Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 09-1999: PRODUCTION GAINS IN COST-EFFECTIVE- NESS ANALYSES - A WELFARE-THEORETI- CAL APPROACH

Bodil O. Hansen and Hans keiding
Additional contact information
Bodil O. Hansen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Hans keiding: University of Copenhagen, Postal: Institute of Public Health Research

Abstract: In the literature on cost-effectiveness analyses, there has recently been considerable debate on the way of measuring the production gain caused by a new treatment as well as its proper evaluation. In this paper, we propose a general framework for the discussion of such questions in the form of a general equilibrium model with separate health variables. It is shown how the standard methods of cost-effectiveness and cost-utility analysis are derived from basic assumptions. Also, the question of whether to choose the human capital or the frictional method in evaluating production gains can be given an answer in this model.

Keywords: Cost-effectiveness analysis; Production gain; General equilibrium model; Health variables; Cost-utility analysis

JEL-codes: D61

17 pages, November 1, 1999

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