Human capital approach

The friction cost method (Koopmanschap et al. 1995) assumes that the human capital approach has a tendency to overestimate the indirect household costs. If a worker is seriously sick or dies, his job will be vacant for some time until a new person is hired or trained. However, the loss will not be there for many years. Therefore, the loss of human capital is calculated not until the time of retirement, but until the time of replacement. This approach is correct for unskilled labor in a situation of unemployment. It fits neither to a fully employed economy nor to a subsistence farmer society where there is no substitution of a father who died. 

In addition to their calculation of direct costs in the USA, Scitovsky and Rice (1987) also determined indirect costs attributable to the loss of productivity, resulting from morbidity and premature mortality in the US. The authors used the human capital approach. Indirect costs were estimated to rise from US 3.9 billion in 1985 to US 7.0 billion in 1986 and US 55.6 bilhon in 1991 (Table 5). 

Hanvelt et al. (1994) estimated the nationwide indirect costs of mortality due to HIV/AIDS in Canada. A descriptive, population-based economic evaluation study was conducted. Data from Statistics Canada were used, which contained information about aU men aged 25-64 years for whom HIV/AIDS or another selected disease was listed as the underlying cause of death from 1987 to 1991. Based on the human capital approach, the present value of future earnings lost for men was calculated. The estimated total loss from 1987 to 1991 was US 2.11 billion, with an average cost of US 558,000 per death associated with HIV/AIDS. Future production loss due to HIV/AIDS was more than double during the period 1987 to 1991, from US 0.27 to US 0.60 billion. A more comprehensive update of this smdy was presented by Hanvelt et al. (1996). The same database and the same data section but for the calendar years 1987-1993 was used. The indirect cost of future production due to HIV/AIDS in Canada based on the human capital approach for that period was estimated to be US 3.28 billion. The authors also calculated the willingness-to-pay to prevent premature death due to HIV/AIDS, which was estimated based on... 

Indirect cost for patients in two AIDS clinics in Athens, Greece, based on the human capital approach were calculated by Papaevangelou et al. (1995). The authors estimated average annual indirect cost at US 11,774. Lifetime indirect cost per case was calculated at up to US 59,047. 

Based on prevalence estimates and mortality rates for the French AIDS epidemic, Lambert (1995) calculated indirect cost by using the human capital approach in 1992 as US 3.054 billion. Future indirect costs up to 2020 were simulated under different scenarios of the HIV prevalence. According to a pessimistic scenario, indirect cost would rise until 2010 (US 9.381 billion) and then keep almost stable until 2020 (US 9.069 billion). If the infection rate could be reduced, indirect costs would decrease to US 1.507 billion in 2020. 

Beside their calculation of direct costs, Stoll et al. (2002a) also examined indirect costs in a German sample of HIV-infected patients after the introduction of HAART. To emphasize the implications of different approaches of indirect costs, the authors determined both costs based on the human capital approach and costs calculated on the friction cost approach. They concluded that indirect costs based on the friction approach per patient in 1997 (US 2,421) add up to only one-tenth of the amount derived from the human capital approach (US 24,639). 

There is a growing body of literature on the costs of HIV/AIDS (Homberger et al. 2007), but all studies address only one branch of the COI tree (Fig. 1). Until now there is not a single publication fully covering all aspects of COI of HIV/AIDS, and different methodologies (such as human capital approach vs. friction cost method) make comparison difficult. In addition, the time lag between the year of the study and the publication is between 3 and 10 years. That is one reason why we know so little about the costs of the last 5 years results are not yet published. 

Cost-benefit analysis uses monetary valuations of the morbidity and mortality consequences of diseases or interventions. This allows estimation of the absolute and relative net social benefit of intervention, calculated as the monetary value of the consequences of an intervention minus the direct costs. Any health or social care intervention with a net social benefit greater than zero (i.e. the benefits are greater than the costs) is worth undertaking. Two approaches have typically been used to value outcomes in monetary values. The first is the human capital approach, where the monetary value of benefit represents the value of changes in the amount or type of work done or use of leisure time as... 

As we have seen, the human capital approach to valuing life is clearly inadequate, but just how inadequate Economic theorists took up this question during the 1970s and 1980s, devising theoretical models based on the premises of expected utility theory. Their hope was that, by making a few plausible assumptions concerning the way individuals... 

The calculation of indirect COI can be based on different methodologies, and there is no generally accepted standard for all circumstances. The most common approach to calculate the indirect costs of illness is the human capital method. The loss of welfare of a society in the form of nongenerated commodities and services mainly depends on the lost working hours. The method assumes that if a person had... 

Similar to our approach in Chapter 3 we standardized all prices in the simulation model to 1.0, except for the price of WC insurance. We also set the production function s distribution parameters (5 and y) equal to 0.10 and 0.20 and the elasticity of substitution (a = l/(l+p)) equal to 1.0. We adjusted the value of the production efficiency parameter (a) to create a 1 rental rate on human capital in completely safe establishments and the value of the returns to scale parameter (o) to make the demand for labor by a firm approximately unitary elastic. Finally, we calibrated the numerical model via the safety production function (s = Sq + + 52 ) using the initial conditions of (1) a 1 in... 

Economic impacts of sustainability can be measured with a capital approach that can be defined as maintaining economic, environmental, human, and social capital over time for future generations (Kulig, Kolfoort, and Hoekstra 2010). The capital approach can be proposed as a theoretical basis for sustainable development indicators (Atkinson and Hamilton 2003 World Bank 2006 UNECE 2014). The capital approach provides a theoretical approach by measuring all capital stocks in their own units. The capital approach can provide consistent, theoretically sound, and policy-relevant comparisons between countries (Kulig et al. 2010). 

Insofar as possible, ensure complementarities with building physical and human capital. This approach will provide twice the bang for the buck by helping the poor survive today and by reducing causes of poverty in future years. Prime examples of this type of approach are workfare and CCT programs. 

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