Cross-country analyses don't estimate health-health responses

Health-Health analysis has attracted considerable attention as one way to evaluate the costs of regulatory policy to people. When a regulation is adopted to reduce the “risk” experienced by a particular group, health-health analysis seeks to evaluate when the indirect effects of an increase in prices or reduction in income offsets the direct effects intended by the regulation. If these indirect effects are large enough, then the general population can experience an increase in their overall risk. The article considers health-health analysis as it relates to policy decisions from conceptual and empirical perspectives. A comparative static analysis was a simple model is used to illustrate the factors influencing the relative effects of income and policy variables on risk. The empirical analysis also suggests that results with aggregate cross-country data and simple reduced-form models for the relationship of mortality to income are sensitive to model specifications and the sample composition.