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Estimating the Effects of Pharmaceutical Innovations on Patients' Employment Outcomes

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Publication Date: September 2003

Publisher(s): Pardee Rand Graduate School

Author(s): Yuhua Bao

Topic: Health (Health care financing)
Labor (Employment and labor supply)

Type: Report


In recent years, advances in medical technologies have been a major source of the increasing cost of health care in the United States. Society and policymakers must increasingly make hard choices when allocating limited resources among competing uses, and evaluating the benefits and costs of new technologies is becoming more urgent. However, current approaches to evaluating the benefits of medical technologies often ignore employment-related benefits, thus undervaluing interventions that improve functioning and productivity among the working-age population. This dissertation reviews evidence of employment-related benefits resulting from effective treatment. The author developed a model showing that the observed incremental labor supply is a result both of more-effective treatment and of other factors such as eligibility for employment-based or public health insurance, both of which are tied to employment status. She then conducted two empirical studies to estimate the employment effects of treatment-one on the effect of Highly Active Antiretroviral Therapy on HIV patients' employment transitions, the other on the effect of recent improvements in pharmacological therapies for hypertension. The author concludes that when translating estimated employment effects into employment-related benefits, one must be aware of possible labor market adjustments associated with the change and base the analysis on labor market equilibria.