Department of Economics, University of California - Davis
FALL 2017

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

Meeting: Tues Thurs 10.30 - 11.50 am  Wellman 106

Office Hours:  Monday      1.30-3.00 p.m. (This is a change effective October 5)
                         Wednesday  2.00-3.30 p.m.

Teaching Assistants: 

Chuan He        Office hours: Tuesday 4-6 pm in room  SSH 0118
Ethan Krohn   Office hours:  Tuesday 2-4 pm in room  SSH 0116

Discussion Sections:
Chuan He
     A01: Wednesday 5.10 - 6.00 pm  93 Hutchison
Chuan He      A02: Wednesday 6.10 - 7.00 pm  93 Hutchison
Ethan Krohn   A03: Wednesday 9.00 - 9.50 am  93 Hutchison
Ethan Krohn   A04: Wednesday 10.00 - 10.50 am  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 (intermediate microeconomics) or ARE 100A or consent of instructor.
Mathematics 16A-B: These are a pre-requisite for Economics 100.
An upper division regression class: one of Economics 102, Economics 140, ARE 106, Statistics 108 or consent of instructor.

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.

Textbook: Recommended but not required 
Jay Bhattacharya, Timothy Hyde and Peter Tu: Health Economics, First edition, Palgrave MacMillan
, 2014.

Copies of the textbook are on two-hour reserve in Shields Library.  
This is the third time I have used this book.

Some past exams and solutions are at


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, Hospitals
Classes 13-14.  Bhattacharya Chs. 5, 6 + Supplemental Notes.

***** Class 15  Midterm Exam 2  (on topics after midterm 1 up to midterm 2) *****

. Suppliers (continued): Pharmaceuticals
Classes 15-16. 
Bhattacharya Ch. 12 + Supplemental Notes.

's Role in Health Care
Classes 17.  Bhattacharya Ch. 20 + Supplemental Notes.

H. Medical Technology
Class 18. Bhattacharya Ch.13
+ Supplemental Notes.

International Comparisons

Class 19. Bhattacharya Ch. 15 + Supplemental Notes.

J. Obesity
Not covered this year

Class 20.  Review of Course


Midterm Exam1:   22.5%    Thursday October 19    
Midterm Exam2:   22.5%    Thursday November 16  
Assignments:           10%       Due 10.30 a.m. 
(1) Thurs Oct 5, (2) Tues Oct 17, (3) Thurs Nov 2, (4) Tues Nov 14, (5) Thurs Nov 30, (6) Thurs Dec 7.
Final Exam:             45%       Friday December 15 1.00 p.m. - 3.00 p.m.    Comprehensive.

Assignments are posted on Canvas under Files / Homeworks.
Homeworks 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. No credit for late assignments. Academic honesty is required - see below.

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: about 60% on material up to the second midterm and 40% on the remainder.


Scores are posted at Canvas. You have one week from when work is first returned in class to raise any questions about grading.


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).

I follow the Department of Economics grading policy of a class average GPA of 2.7.
e.g. 20% A's. 50% B's, 15% C's, 10% D's and 5% F's.

What is academic honesty? From the UCD Student Judicial Affairs website, examples of Academic Misconduct include:
Cheating on exams or other coursework: Copying or attempting to copy from another student, or allowing another student to copy; Displaying or using any unauthorized material such as notes, cheat-sheets, or electronic devices;  Looking at another studentís exam; Talking, texting or communicating during an exam; Looking around during an exam; ē Altering assignments or exams for re-grading purposes; Bringing pre-written answers to an exam; Having another person take an exam for you, or taking an exam for another student;  Continuing to work on an exam after the instructor has announced that all students must stop working; Stealing another studentís work.
Plagiarism: Taking credit for any work created by another person. Work includes, but is not limited to books, articles, experimental methodology or results, compositions, images, lectures, computer programs, internet postings; Copying any work belonging to another person without indicating that the information is copied and properly citing the source of the
work; ē If not directly copied, using another personís presentation of ideas without putting it in your own words or form and not giving proper citation; Creating false citations that do not correspond to the information you have used.
Unauthorized Collaboration
(working on your own is expected unless you are informed that working together is allowed): Working together on graded coursework without permission of the instructor; Working with another student beyond the limits set by the instructor. - working with others on graded coursework without specific permission of faculty (on in-class or take-home tests, papers, labs, or homework assignments).
Misuse of an instructorís course materials or the materials of others, including but not limited to: Posting or sharing any course materials of an instructor without the explicit written permission of that instructor; Purchasing or copying assignments or solutions, to complete any portion of graded work, without the instructorís permission.
- using another's work without giving credit. You must put others' words in quotation marks and cite your source, and must give citations when using others' ideas, even if paraphrased in your own words.
Lying or fraud: Giving false excuses to obtain exceptions, such as the postponement of an exam or assignment due date, assignment of incomplete grades, or late drops; Forging signatures or submitting documents containing false information.
Submitting the same work in two or more different classes without the permission of the instructors.
Intimidation or disruption includes, but is not limited to the following:
Pressuring an instructor or teaching assistant to regrade work, change a final grade, or obtain an exception such as changing the date of an exam, extending a deadline, or granting an incomplete grade; Refusing to leave an office when directed to do so; Physically or verbally intimidating or threatening an instructor, teaching assistant or staff person, including yelling at them, invading personal space, or engaging in any form of harassment; Repeatedly contacting or following an instructor, teaching assistant, or staff person when directed not to do so; Misusing a classroom electronic forum by posting material unrelated to the course; Interfering with an instructorís or teaching assistantís ability to teach a class, or interfering with other studentsí participation in a class by interrupting, physically causing a disruption, or excessive talking.

IMPORTANT: For my class the assignment work handed in must be your own.