The family as producer of health - an extended grossman model

Deriving a model, where each family member is the producer of his own and other family members' health, shows that the family will not try to equalise marginal benefits and marginal costs of health capital for each family member. They will rather invest in health until the rate of marginal consumption benefits equals the rate of marginal net effective costs of health capital. The level of compensation in the social insurance system, the effective price of care, health related information, and transfer payments will all affect the production possibility set, and therefore the optimal level and distribution of family health. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: I1; I12.