HEALTH, INCOME, AND RISK-AVERSION - ASSESSING SOME WELFARE COSTS OF ALCOHOLISM AND POOR HEALTH

The economic costs of adverse health outcomes have typically been eval uated in a context of risk neutrality, an approach that ignores the po tential welfare importance of individuals' risk preferences. This pape r presents a framework that unifies the research in health capital and earnings with that on risk preferences in the presence of stochastic outcomes. The model is implemented to obtain estimates of the economic damages due both to general health problems as well as to one specifi c health problem that is of considerable interest from society's persp ective: alcoholism.