Smoking and alcohol use are widespread among adolescents in the US and are linked to negative socioeconomic effects.While existing research has separately looked at the dynamic choice and the social interactions that shape adolescent risky behaviours, this column considers both components in a dynamic social interactions model. Looking at alcohol and smoking use in a school environment, it finds that addiction and peer effects are more than twice as important as the effect of individual preferences in shaping risky behaviour and that students take into account the amount of time they have left in the school system.
Health economics
Pharmaceutical companies often market their drugs to highly connected physicians through monetary or in-kind transfers. The column examines how peer influence broadened the influence of the payments for three drugs between 2014 and 2016. Following a large payment, prescriptions for the target drug by the paid physician and the physician's peers increased, with peer spillovers contributing a quarter of the increase.
Sicker consumers tend to exhibit higher demand for health insurance, which drives up costs. This column argues that this adverse selection takes place along two margins: whether to buy insurance at all and how much coverage to buy, It develops a new framework that incorporates both selection margins, and shows that policies aimed at addressing one margin can often exacerbate selection along the other. It is therefore vital for optimal policy to consider both margins simultaneously.
Higher risk perception may suppress demand for a product class and chill R&D investment, or increase the incentive to innovate risk-mitigating technologies. The column uses media coverage of accidents involving CT scanners to investigate the impact on firm innovation. Higher public risk perception increased patent applications and the rate of new product innovation, even without changes in liability or regulation.
How much is spent on end-of-life care, and who foots the bill? Eric French of UCL tells Tim Phillips about the total cost of the last year of our lives, and how different countries have very different ideas of who should pay it.
Read about the research at here, and download the VoxEU book about the economics behind ageing, Live Long and Prosper? The Economics of Ageing Populations.