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This volume is part of an annual series entitled Advances in Health Economics and Health Services Research. We express our gratitude to the series editors Björn Lindgren and Michael Grossman for inviting us to edit this volume.

This paper presents a behavioral economics model with bounded rationality to describe an individual's food consumption choices that lead to weight gain and dieting. Using a physiological relationship determining calories needed to maintain weight, we simulate the food consumption choices of a representative female over a 30-year period. Results show an individual will periodically choose to diet, but that diet will reduce weight only temporarily. Recurrence of weight gain leads to cyclical dieting, which reduces the trend rate of weight increase. Dieting frequency is shown to depend on decision period length, dieting costs, and habit persistence.

If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for obesity, health insurance coverage systematically shields those covered from the full costs of physical inactivity and overeating. Since the obese consume significantly more medical resources than the non-obese, but pay the same health insurance premiums, they impose a negative externality on normal weight individuals in their insurance pool.

To estimate the size of this externality, we develop a model of weight loss and health insurance under two regimes – (1) underwriting on weight is allowed and (2) underwriting on weight is not allowed. We show that under regime (1), there is no obesity externality. Under regime (2), where there is an obesity externality, all plan participants face inefficient incentives to undertake unpleasant dieting and exercise. These reduced incentives lead to inefficient increases in bodyweight, and reduced social welfare.

Using data on medical expenditures and bodyweight from the National Health and Interview Survey and the Medical Expenditure Panel Survey, we estimate that, in a health plan with a coinsurance rate of 17.5%, the obesity externality imposes a welfare cost of about $150 per capita. Our results also indicate that the welfare loss can be reduced by technological change that lowers the pecuniary and non-pecuniary costs of losing weight, and also by increasing the coinsurance rate.

This paper examines the associations between obesity, employment status and wages for several European countries. Our results provide weak evidence that obese workers are more likely to be unemployed or tend to be more segregated in self-employment jobs than their non-obese counterparts. We also find difficult to detect statistically significant relationships between obesity and wages. As previously reported in the literature, the associations between obesity, unemployment and wages seem to be different for men and women. Moreover, heterogeneity is also found across countries. Such heterogeneity can be somewhat explained by some labor market institutions, such as collective bargaining coverage and employer-provided health insurance.

Previous research provides evidence of a negative effect of body mass on women's economic outcomes. We extend this research by using a much older sample of individuals from the Panel Study of Income Dynamics and by using a body mass measure that is lagged by 15 years instead of the traditional 7 years. One of the main contributions of this paper is a replication of previous research findings given our differing samples and measures. We compare OLS estimates with sibling fixed effects estimates and find that obesity is associated with an 18% reduction in women's wages, a 25% reduction in women's family income, and a 16% reduction in women's probability of marriage. These effects are robust – they persist much longer than previously understood and they persist across the life course, affecting older women as well as younger women.

The doubling of obesity in the U.S. over the last 25 years has led policymakers and physicians to encourage weight loss, but few methods of weight loss are effective. One promising avenue is pharmacotherapy. However, little is known about the use of anti-obesity drugs. This paper describes the market for anti-obesity drugs and studies the utilization of anti-obesity drugs using data from the Medical Expenditure Panel Survey for 1996–2002, a period that is interesting because it covers the introduction of three, and the withdrawal of two, anti-obesity drugs from the market.

Our results point to wide sociodemographic disparities in anti-obesity drug use. Women are almost 200% more likely than men to use anti-obesity drugs. Hispanics and African-Americans are only 39% as likely as Whites to use them. Those with prescription drug coverage are 46% more likely to use anti-obesity drugs.

We also find that the vast majority of subjects who are approved to take these drugs are not taking them, and a significant number who are not approved to take the drugs are taking them. We find strong evidence that the well-publicized 1997 withdrawal of fenfluramine and dexfenfluramine had a chilling effect on the overall market for anti-obesity drugs. We find little difference in observed characteristics between those who took the withdrawn drugs and those who took the other anti-obesity drugs in the market.

We examine the extent to which food prices and restaurant outlet density are associated with adolescent fruit and vegetable consumption, body mass index (BMI), and the probability of overweight. We use repeated cross-sections of individual-level data on adolescents from the Monitoring the Future Surveys from 1997 to 2003 combined with fast food and fruit and vegetable prices obtained from the American Chamber of Commerce Researchers Association and fast food and full-service restaurant outlet density measures obtained from Dun & Bradstreet. The results suggest that the price of a fast food meal is an important determinant of adolescents’ body weight and eating habits: a 10% increase in the price of a fast food meal leads to a 3.0% increase in the probability of frequent fruit and vegetable consumption, a 0.4% decrease in BMI, and a 5.9% decrease in probability of overweight. The price of fruits and vegetables and restaurant outlet density are less important determinants, although these variables typically have the expected sign and are often statistically associated with our outcome measures. Despite these findings, changes in all observed economic and socio-demographic characteristics together only explain roughly one-quarter of the change in mean BMI and one-fifth of the change in overweight over the 1997–2003 sampling period.

A five category self-reported health indicator together with the self-reported prevalence of diabetes and heart disease for older Canadians, are examined using data from five cohorts of men and women from the 2001 Canadian Community Health Survey. Consistent with other studies we find that smoking and dietary behaviors are highly correlated with general self-reported health, diabetes, and heart disease. Individual standardized weight, the body mass index, was negatively associated with health outcomes for all age groups, but became less important with age as socioeconomic variables became more important. Socioeconomic variables explained more of the variation in health outcomes than the combined effects of tobacco use and excessive weight problems. In addition, there is compelling evidence that obesity could overtake smoking as the leading cause of health problems in Canada.