KENYATTA UNIVERSITY
SCHOOL OF ECONOMICS
DEPARTMENT OF APPLIED ECONOMICS
EAE 309: HEALTH ECONOMICS
PREPADERD BY:
PETER K. MUSYOKA
&
GEORGE KOSIMBEI (Ph.D)
Page 1 of 89
,Core readings
1. Folland, S., Goodman, A. and Stano, M. (2008). The Economics of Health and Health
Care. FourthEdition. Prentice Hall. ISBN: 0-13-0122157
2. Folland, S., Goodman, A. and Stano, M. (2010). The Economics of Health and Health
Care. SixthEdition. Prentice Hall.
3. Witter, S., Ensor, T., Jowett, M. and Thompson, R. (2000). Health Economics for
DevelopingCountries: A Practical Guide. MacMillan Education, London, 2000. ISBN: 0-
333-75205-8
4. Santerre, R.E. and Neun, S.P. (2004). Health Economics: Theories, Insights and Industry
Studies.Thomson South-Western, Cengage Learning. Fifth Edition
5. Phelps, C.E. (2003). Health Economics. Third Edition, New York. Harper Collins
6. Phelps, C.E. (2010). Health Economics, Fourth Edition. Publisher: Prentice Hall, ISBN-
10:
7. 0321594576
8. Zweifel, P. and Breyer, F (1997). Health Economics, Oxford University Press.
9. Zweifel, P. and Breyer, F and Kifmann, M (2009). Health Economics, Third Edition.
Springer, ISBN:978-3-540-27804-7
Supplementary readings
1. Jack, W. (1999). Principles of Health Economics for Developing Countries. World Bank.
ISBN: 0-8213-4571-0 McGuire, A., Henderson, J. and Mooney, G. (1992). The
Economics of Health Care.Routledge. ISBN: 0-415-06586-0.
2. Donaldson, C. and Gerard, K. (1993). Economics of Health Care Financing. Macmillan.
Economics Issues in Health Care Series. ISBN: 0-333-53870-6. #1
3. Jacobs, P. (1991). The Economics of Health and Medical Care. Third Edition, An Aspen
Publication.
4. Feldstein, P.J. (1993) Health Care Economics, 4th Edition, Delmar Publishers Inc.
5. Rice, T. (1998). The Economics of Health Reconsidered. Chicago: Health Administration
Press
6. Clewar, A and Perkens, D. (1998). Economics of Health Care Management. London:
Prentice Hall.
Page 2 of 89
,7. Drummond M.F, Sculpher, M.J., Torrance, G.W, O'Brien B.J. and Stoddart, G.L. (2005).
Methods for the Economic Evaluation of Health Care Programmes. Third Edition,
Oxford University Press
8. Foxrushby J. and Cairns J. (2005) Economic Evaluation. Open University Press.
ISBN:9780335218479
9. Culyer, A.J and Newhouse, J.P. (2000). Handbook of Health Economics, North Holland,
Volumes 1A&1B
Page 3 of 89
, TOPIC 1: INTRODUCTION
The scope and relevance of health economics
HEALTH ECONOMICS
The concepts presented are drawn from the core of economic theory that can be found in nearly
any economic textbook, but because there are special features of health care that make it “
different‟‟ than standard goods and services (e.g., shoes, hammers, haircuts, VCRs, legal services
etc.), applying the concepts in the health sector is not always straightforward. This is part of
what makes health economics such an interesting and challenging field. Where else, for instance,
is such a basic economic truth as the proposition that increasing the number of suppliers for a
good will lower the price of the good turned on its head with the anomalous finding that, in the
physician services market, increases in supply of physicians have been associated with increases
in price? But once you understand the nature of health care as an economic commodity and the
structure of the health care sector, the result is not surprising. Indeed, you can use basic
economic concepts to understand the dynamics that lead to such an “anomalous‟‟ result.
Definition: Health Economics is therefore defined as the study of how scarce resources are
allocated to and within the health economy and also utilization of these resources to provide the
health care needs of the population.
Production of health care and its distribution across different populations also fall under this
definition. Under Health Economics, we will lay bare the enormity and the importance of the
health sector. To achieve this, different measures of size and growth are used to establish the
relevance of the health economy to both individual and national policy concerns. Further, we will
utilize economics in trying to explain how health care markets function.
So, what do we need: Health Economics or Health Care Economics?
Health is defined as “a state of complete physical, mental and social well-being and not merely
the absence of disease or infirmity” (WHO, 1948).
Having defined health we then ask: Is health an economic commodity? We note that health has
value in use and may be scarce but it has no value in exchange, i.e it is non-tradable. So since
Page 4 of 89
SCHOOL OF ECONOMICS
DEPARTMENT OF APPLIED ECONOMICS
EAE 309: HEALTH ECONOMICS
PREPADERD BY:
PETER K. MUSYOKA
&
GEORGE KOSIMBEI (Ph.D)
Page 1 of 89
,Core readings
1. Folland, S., Goodman, A. and Stano, M. (2008). The Economics of Health and Health
Care. FourthEdition. Prentice Hall. ISBN: 0-13-0122157
2. Folland, S., Goodman, A. and Stano, M. (2010). The Economics of Health and Health
Care. SixthEdition. Prentice Hall.
3. Witter, S., Ensor, T., Jowett, M. and Thompson, R. (2000). Health Economics for
DevelopingCountries: A Practical Guide. MacMillan Education, London, 2000. ISBN: 0-
333-75205-8
4. Santerre, R.E. and Neun, S.P. (2004). Health Economics: Theories, Insights and Industry
Studies.Thomson South-Western, Cengage Learning. Fifth Edition
5. Phelps, C.E. (2003). Health Economics. Third Edition, New York. Harper Collins
6. Phelps, C.E. (2010). Health Economics, Fourth Edition. Publisher: Prentice Hall, ISBN-
10:
7. 0321594576
8. Zweifel, P. and Breyer, F (1997). Health Economics, Oxford University Press.
9. Zweifel, P. and Breyer, F and Kifmann, M (2009). Health Economics, Third Edition.
Springer, ISBN:978-3-540-27804-7
Supplementary readings
1. Jack, W. (1999). Principles of Health Economics for Developing Countries. World Bank.
ISBN: 0-8213-4571-0 McGuire, A., Henderson, J. and Mooney, G. (1992). The
Economics of Health Care.Routledge. ISBN: 0-415-06586-0.
2. Donaldson, C. and Gerard, K. (1993). Economics of Health Care Financing. Macmillan.
Economics Issues in Health Care Series. ISBN: 0-333-53870-6. #1
3. Jacobs, P. (1991). The Economics of Health and Medical Care. Third Edition, An Aspen
Publication.
4. Feldstein, P.J. (1993) Health Care Economics, 4th Edition, Delmar Publishers Inc.
5. Rice, T. (1998). The Economics of Health Reconsidered. Chicago: Health Administration
Press
6. Clewar, A and Perkens, D. (1998). Economics of Health Care Management. London:
Prentice Hall.
Page 2 of 89
,7. Drummond M.F, Sculpher, M.J., Torrance, G.W, O'Brien B.J. and Stoddart, G.L. (2005).
Methods for the Economic Evaluation of Health Care Programmes. Third Edition,
Oxford University Press
8. Foxrushby J. and Cairns J. (2005) Economic Evaluation. Open University Press.
ISBN:9780335218479
9. Culyer, A.J and Newhouse, J.P. (2000). Handbook of Health Economics, North Holland,
Volumes 1A&1B
Page 3 of 89
, TOPIC 1: INTRODUCTION
The scope and relevance of health economics
HEALTH ECONOMICS
The concepts presented are drawn from the core of economic theory that can be found in nearly
any economic textbook, but because there are special features of health care that make it “
different‟‟ than standard goods and services (e.g., shoes, hammers, haircuts, VCRs, legal services
etc.), applying the concepts in the health sector is not always straightforward. This is part of
what makes health economics such an interesting and challenging field. Where else, for instance,
is such a basic economic truth as the proposition that increasing the number of suppliers for a
good will lower the price of the good turned on its head with the anomalous finding that, in the
physician services market, increases in supply of physicians have been associated with increases
in price? But once you understand the nature of health care as an economic commodity and the
structure of the health care sector, the result is not surprising. Indeed, you can use basic
economic concepts to understand the dynamics that lead to such an “anomalous‟‟ result.
Definition: Health Economics is therefore defined as the study of how scarce resources are
allocated to and within the health economy and also utilization of these resources to provide the
health care needs of the population.
Production of health care and its distribution across different populations also fall under this
definition. Under Health Economics, we will lay bare the enormity and the importance of the
health sector. To achieve this, different measures of size and growth are used to establish the
relevance of the health economy to both individual and national policy concerns. Further, we will
utilize economics in trying to explain how health care markets function.
So, what do we need: Health Economics or Health Care Economics?
Health is defined as “a state of complete physical, mental and social well-being and not merely
the absence of disease or infirmity” (WHO, 1948).
Having defined health we then ask: Is health an economic commodity? We note that health has
value in use and may be scarce but it has no value in exchange, i.e it is non-tradable. So since
Page 4 of 89
