HDR Candidate: Sabrina Lenzen

Milestone: Confirmation

Title: Microeconomic models of physical activity, cognition and health care utilization in the aging population

When: Monday, 22 March 2021; 9.30-11.30am

Where: Zoom - https://uqz.zoom.us/j/86797265982 (UQ Staff and Students only).


This thesis studies cognitive capital deterioration in the aging population, its modifiable risk factors and economic consequences and thus contributes to an underexplored area of research. More specifically, this thesis provides a precise measure of the impact of physical activity on the depreciation of cognition in the older population, its effect on health care utilization and mechanisms of how to increase physical activity participation. The thesis consists of three research papers, which contribute to the health economics literature by applying novelmicroeconomic and microeconometric models that evolve from strong foundations in health economics theory.

In the first paper, we apply a novel applied microeconometric model to investigate the protective effect of physical activity on cognitive depreciation in the older population. Utilizing longitudinal data from six waves of the Survey of Health, Ageing and Retirement in Europe (2004- 2017), our empirical model is the first to account for the dynamic nature of cognition and the endogeneity of physical activity in this relationship. To address these sources of bias, we propose a system - generalized method of moments estimator, using lagged levels and differences of the endogenous explanatory variables as instruments, while transforming out the fixed effects. We find that being moderately and vigorously physically active at least once a week increases cognition by 0.282 and 0.552 standard deviations for men and women respectively. We find different effects for varying physical activity intensity.

The second paper contributes to the literature by applying an innovative econometric approach to identify the mediating effect of cognition in the impact of physical activity on health care utilization. The challenge in estimating the mediation effect is the non-recursive structure, where physical activity, cognition and health care utilization are bi-directionally and simultaneously related. Using longitudinal data from four waves (2004 - 2010) of the United States Health and Retirement Study, we conduct mediation analyses using structural equation modelling, allowing the error terms to be correlated. Our empirical model provides exogenous variables for identification in order to fulfil the rank and order condition and thus provides precise estimates. We study the effect of physical activity through memory on hospital nights and find statistically significant evidence of a mediation effect. We find a small to medium mediation effect of cognition on the probability of being an inpatient care user and a rather small effect on the number of hospital nights.

The third paper explores how the negative externalities of perceived neighbourhood safety may impact older people’s decision to be physically active. This paper contributes to the health economics literature by being the first study to account for the endogeneity of perceived safety in this relationship. We utilize longitudinal data from 2004 to 2014 of the Health and Retirement Study in the US and apply an instrumental variable approach. We exploit within variation of county-level violent crime rates in the US and use this as an instrumental variable for perceived neighbourhood safety. We control for individual, household and neighbourhood socioeconomic characteristics, as well as individual fixed effects. To capture changes in policy or infrastructure at the national and regional level and over time, we include time, region and region-specific time trends. We find a significant negative effect of decreasing perceived neighbourhood safety on older people’s physical activity behaviour. In addition to violent crime rates, we identify racial composition and physical disorder in a neighbourhood as the main drivers behind persons’ perception of neighbourhood safety.