ABSTRACT
Introduction The demand-for-health model by Grossman (1972a,b) has become a cornerstone in the field of health economics.1 The model has been tested in a number of empirical applications (Grossman, 1972a; Cropper, 1981; Wagstaff, 1986, 1993; van Doorslaer, 1987; Leu and Gerfin, 1992; Erbsland et al., 1995; Nocera and Zweifel, 1998). An important problem in the empirical analyses has been the unobservability of health capital (health status). Measures of health status have been constructed based on various health indicators, e.g. various health problems and symptoms. This has led to problems in interpreting the resulting health measure and the size of the regression coefficients in the estimated demand for health equations.
