Department of Economics, University of California - Davis
FALL 2018

Professor Colin Cameron,  1124 Social Sciences and Humanities
Email:  Website:

Meeting: Tues Thurs 9.00 - 10.20 am  Chem 179

Office Hours:  Monday      1.30-3.00 p.m. 
                         Wednesday  3.30-5.00 p.m.

Teaching Assistants: 

Camila Saez         Office hours: Wednesday 9 - 11 am in room  SSH 0116
Joshua Grelewicz   Office hours: Tuesday 12-1 pm in room  SSH 0118 and Wednesday 11am-noon in SSH 0116.

Discussion Sections:
Camila Saez
          A01: Wednesday 12.10 - 1.00 pm  93 Hutchison
Camila Saez           A02: Wednesday 1.10 - 2.00 pm  93 Hutchison
Joshua Grelewicz   A03: Wednesday 2.10 - 3.00 pm  93 Hutchison
Joshua Grelewicz   A04: Wednesday 3.10 - 4.00 pm  93 Hutchison

Course Goals:
The course goals are:
(1) Provide a detailed description of the institutional features of the health care market and current trends in this rapidly changing field;
(2) Demonstrate the use and usefulness of analyzing the health care market using economic analysis, particularly microeconomics, and some statistical/mathematical analysis.
Compared to other areas of economics, health economics is complicated by a lack of information (about what health services the consumer needs), great uncertainty (hence insurance) and payment through third-parties (insurance companies) rather than direct payment by the consumer.
(3) Analyze health data using regression methods and the statistical program Stata.

Economics 100 or 100A (intermediate microeconomics) or ARE 100A or consent of instructor.
Mathematics 16A-B: These are a pre-requisite for Economics 100/100A.
Regression class (upper division): one of Economics 102, Economics 140, ARE 106, Statistics 108 or consent of instructor.


A. Introduction, Overview of U.S. Health Market, getting started in Stata
Class 1.     Bhattacharya Chapter 1 + Supplemental Notes.

B. Health Insurance in the U.S.: Facts, definitions and Rand experiment
Classes 2-3.   Bhattacharya Ch.18  + Supplemental Notes.

C. Economics of Health Insurance: Risk pooling, risk aversion, moral hazard 
Classes 4-6.   Bhattacharya Chs.7, 8, 9.11-9.12 + Supplemental Notes.

***** Class 7  Midterm Exam 1   *****

C. Economics of Health Insurance: moral hazard, adverse selection, other countries
Class 8-9.   Bhattacharya Chs.11 + Supplemental Notes.

D. Economic Evaluation of Health Services: cost-benefit and cost-effectiveness analysis
Classes 10-11.  Bhattacharya Ch.14 + Supplemental Notes.

E. Demand for Health Care: Grossman model
Classes 12.  Bhattacharya Chs.2-3 + Supplemental Notes

F. Suppliers: Physicians, begin hospitals
Class 13.  Bhattacharya Chs. 5, 6 + Supplemental Notes.

*****   Classes 14-16.  Cancelled due to air pollution from Camp Fire   *****
*****                            This includes cancelling midterm 2 

F. Suppliers (continued): End hospitals, pharmaceuticals
Class 17. 
Bhattacharya Ch. 12 + Supplemental Notes.

's Role in Health Care
Class 18.  Bhattacharya Ch. 20 + Supplemental Notes.

H. Medical Technology
Dropped from original syllabus due to cancelled classes

International Comparisons

Class 19. Bhattacharya Ch. 15 + Supplemental Notes.

Class 20.  Review of Course


Course material is posted at the course Canvas site (
Additionally, some past exams and solutions are at

Textbook: Highly recommended but not required 
Jay Bhattacharya, Timothy Hyde and Peter Tu: Health Economics, First edition, Palgrave MacMillan, 2014.
A few days before classes start an electronic version (with try-before-you-buy access for 10 days) should be available through Red Shelf - click on the Modules tab in Canvas for access. 
Copies of the textbook are on two-hour reserve in Shields Library.

Stata for regression:

Part of the course entails analyzing health-related data using regression methods with the statistical package STATA.
The discussion sections are in university computer labs and the first discussion section will be on getting started in STATA.

Stata is installed in 93 Hutchison, 2060 Scilab and the Virtual Lab (after 2060 SciLab closes - see
To see whether 93 Hutchison and 2060 SciLab are available see

If you choose to purchase Stata go to 
For this course and other economics classes Stata/IC is more than adequate and costs $45 (6 months), $89 (1 year); $198 (permanent copy).
To install Stata after it is purchased: (1) Choose the correct operating system (e.g. Windows or Mac); (2) Choose the correct version of Stata - the student price version is Stata/IC; (3) When you first run Stata after installation it will ask for an "authorization code". These codes are given in a pdf attachment you will received in the email from Stata following purchase (some are lengthy and it is easiest to cut and paste them in).

To get started in Stata see

Lecture slides: 
Lecture Slides are posted at the course Canvas site ( under Files / Lecture Slides.

Supplementary Material:
The UCSD Intermediate Microeconomics videos on topics such as externalities are at the course Canvas site under Assignments /  UCSD Intermediate Micro Handbook.

COURSE GRADING - CHANGED November 19 to 3 classes cancelled

Midterm Exam1:    30%    Thursday October 18   
Assignments:           15%       Due 9.00 a.m. 
Tues Oct 9, Tues Oct 16, Thurs Nov 1, Tues Nov 27 (was originally Nov 13), Thurs Nov 29, Thurs Dec 6.
Final Exam:             55%       Tuesday December 11 8.00 a.m. - 10.00 a.m.    Comprehensive.

Assignments are posted on Canvas under Files / Homeworks.
Doing the assignments is a valuable part of learning both health economics and data analysis using Stata. 
Assignments will be graded satisfactory (2%) or unsatisfactory (0%). Full solutions will be distributed. Satisfactory means a serious attempt to answer at least 80% of the questions. The lowest of the scores on the six assignments is dropped, i.e. no penalty for not handing in one assignment if the other five are graded satisfactory.
Assignments must be handed in on time, so solutions can be discussed in class and distributed in a timely manner. No credit for late assignments.

Exams are closed book with a mixture of short answer (about two-thirds) and multiple choice (about one-third) questions.
The final exam is comprehensive: approximately 20% on material up to first midterm, 40% on material from first midterm to end of class 14; 30% on classes 17-19; and 10% on regression with Stata.


Scores are posted at Canvas. You have one week from when work is first returned in class (or in discussion section in the case of assignments), to raise any questions about grading.

Note that there is no automatic conversion formula such as an 85 is a B. Instead if 85 was the median (middle) score among all students who took the class then you would get the median grade which is most often C+/B-. To let you know how you are going on each exam I give the distribution of the scores for the exam along with a "suggestive" grading curve. But the course grade is based on a course curve.

Course grade is determined by the total score, with weights given above. The assignments are graded on a generous scale (satisfactory or unsatisfactory), so most students will get full credit on the assignment portion. Therefore for most students the course score is determined by scores on the assignments and exams. To indicate your progress I give a grade on each midterm. But the final grade is determined by summing the exam and assignment scores (and not by averaging the grades).

Grading policy: To ensure fairness and consistency in grading, the Department expects that the GPA in all undergraduate economics courses will average 2.7. For example, a distribution with 20% A's, 50% B's, 15% C's, 10% D's, and 5% F's could be consistent with an overall GPA of 2.7.


Academic Honesty: Academic dishonesty is unfair to the majority of students who are honest. To that end the Davis Division of the U.C. Faculty Senate has the following policies.
(1) All undergraduate and graduate course outlines (syllabi) should list or provide a link to the U.C. Davis Code of Academic Conduct which is at . This provides many leading examples of academic misconduct. You should read this.
(2) One specific example of academic honesty is copying from solutions to assignments given in previous 132 courses.

(3) If an instructor has a reasonable suspicion of academic misconduct, whether admitted by the student or not, the instructor shall report the matter to the Office of Student Support and Judicial Affairs.
(4) The instructor has authority to determine a grade penalty when academic misconduct is admitted or is determined by adjudication to have occurred; with a
maximum grade penalty of F for the course.
Note that Student Support and Judicial Affairs may separately impose sanctions for academic misconduct, including community service, suspension and dismissal.

Out of class collaboration: You are allowed to work together in groups for the assignments, but each student must turn in an individual solution. Please indicate on the solution the names of the other students you worked with, if any that you worked with you on the problem set. And for Stata, each person must create their own Stata output and write up their own answers. It is not a violation of this policy to submit essentially the same answer on an assignment as another student, but it is a violation of this policy to submit a close to exact or exact copy.

The most common form of academic misconduct in Economics 132 is copying from past assignment solutions or copying
(close to exact or exact) from other students. The most common penalty for doing so will be to receive zero for that assignment and additionally having your course grade reduced by one grade (examples: a B becomes a C, or a B- becomes a C-).