Health capital and demand for health

Michael Grossman (1972)* paper is perhaps the first attempt to develop a formal model of individual demand for health. Build upon Becker's human capital framework (1964, 1965, 1967), he treated health as a form of human capital stock, which depreciates by age, but can be increased by investment. Here's the abstract of the paper:

The aim of this study is to construct a model of the demand for the commodity "good health." The central proposition of the model is that health can be viewed as a durable capital stock that produces an output of healthy time. It is assumed that individuals inherit an initial stock of health that depreciates with age and can be increased by investment. In this framework, the "shadow price" of health depends on many other variables besides the price of medical care. It is shown that the shadow price rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education if more educated people are more efficient producers of health. Of particular importance is the conclusion that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantity of medical care demanded.

*Grossman, Michael, "On the Concept of Health Capital and the Demand for Health," The Journal of Political Economy, Vol. 80, No. 2 (Mar. - Apr., 1972), pp. 223-255.