nep-hea New Economics Papers
on Health Economics
Issue of 2009‒02‒22
25 papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Physician Sovereignty: The Dangerous Persistence of an Obsolete Idea By David Lawrence
  2. The Impact of Regional Unemployment on Life Expectancy in Germany. By Gerd Grözinger
  3. Quality of Life Lost Due to Road Crashes By Patricia Cubí
  4. Does sex education influence sexual and reproductive behaviour of women? Evidence from Mexico By Pamela Ortiz Arévalo
  5. In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be linearly related to these two factors. Therefore, the estimates reported by Lichtenberg (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States. By Sule Akkoyunlu; Frank R. Lichtenberg; Boriss Siliverstovs; Peter Zweifel
  6. The Evolution of the Conditional Joint Distribution of Life Expectancy and Per Capita Income Growth By Stengos, T.; Thomson, B.; Wu, X.
  7. Health Care Reform in the United States By David Carey; Bradley Herring; Patrick Lenain
  8. Morbidity and health vare in Kerala: A Distributional profile and implications By M.H. Suryanarayana
  9. Can insurance reduce catastrophic out-of-pocket health expenditure? By Rama Joglekar
  10. The role of consumption and the financing of health investment under epidemic shocks By Azomahou, Theophile; Diene, Bity; Soete, Luc
  11. Time to death and health expenditure of the Czech health care system By Kateřina Pavloková
  12. Blind Optimism Challenging the Myths About Private Health Care in Poor Countries By Anna Marriott
  13. Does graded return to work improve disabled workers’ labor market attachment? By Jan Høgelund,; Anders Holm; James McIntosh
  14. Evolution 1998-2002 of the antidepressant consumption in France, Germany and the United Kingdom By Nathalie Grandfils; Catherine Sermet
  15. The Economics of Participation and Time Spent in Physical Activity By Humphreys, Brad; Ruseski, Jane
  16. Revisiting the economy by taking into account the different dimensions of well-being By Becchetti, Leonardo
  17. The Impact of AIDS on Income and Human Capital By Ferreira, Pedro Cavalcanti; Santos, Marcelo; Pessoa, Samuel
  18. Volunteering, Income Support Programs and Disabled Persons By Campolieti , Michele; Gomez, Rafael; Gunderson, Morley
  19. Rising health spending, new medical technology and the Baumol effect By Marc Pomp; Suncica Vujic
  20. Long-term care: regional disparities in Belgium By Karakaya, Güngör
  21. Socioeconomic Differences in the Health of Black Union Army Soldiers By Chulhee Lee
  22. Towards an Efficient Mechanism for Prescription Drug Procurement By Kyna Fong; Michael Schwarz
  23. Maternal Smoking and the Timing of WIC Enrollment By Theodore J. Joyce; Andrew D. Racine; Cristina Yunzal-Butler
  24. The Effect of Fast Food Restaurants on Obesity By Janet Currie; Stefano DellaVigna; Enrico Moretti; Vikram Pathania
  25. Income and Health Spending: Evidence from Oil Price Shocks By Daron Acemoglu; Amy Finkelstein; Matthew J. Notowidigdo

  1. By: David Lawrence
    Abstract: The heart of the model is this: to quote Pogo, "We have met the enemy and it is us." We doctors are the problem, not because wqe are venal or self-serving or insulated from reality. Far from it. Most of us are hard-working, dedicated professionals. We are the problem, though, because of the way our profession developed in the 20th century. This model is no longer appropriate for what lies ahead. The notion of the sovereign physician comes from Paul Starr's 1982 work, "The Social Transformation of American Medicine: The Rise of a Sovereign Profession and the Making of a Vast Industry.: Starr argues that the rise of the sovereign profession we know today was neither inevitable nor foreordained. It was instead the result of a long struggle to establish the modern medical profession in the face of other competitors and forces. Sovereignty is neither good nor bad in and of itself. It is its manifestations in medical practice, and its suitability for the future, that is of concern.
    Keywords: health care, chronic disease, medical care, medical technology, health reform, physicians
    JEL: I1 I12
    Date: 2009–02
  2. By: Gerd Grözinger
    Date: 2009–02
  3. By: Patricia Cubí (Universidad de Alicante)
    Abstract: The objective of this paper is to evaluate the effect of a road crash on the health-related quality of life of injured people. A new approach based on the cardinalization of different categorical measures of ill-health, such as TTO and VAS indexes, is suggested and used for assessing the robustness of the results. The methodology is based on the existing literature about treatment effects. Our main contribution focuses on evaluating the chronic loss oh health, that would allow to properly estimate the health losses in quality-of-life terms.
    Keywords: Health-related quality of life; Health measurement; Road crashes
    JEL: C25 I10
    Date: 2009–01
  4. By: Pamela Ortiz Arévalo (Universidad de Alicante)
    Abstract: This article examines the influence of sex education on sexual and reproductive behavior in Mexican women. Exposure to in-school sex education is identified and duration-hazard models are estimated to assess its effects on initiation of sexual activity and use of contraception methods, and timing of first and second pregnancies. Results consistently reveal that women exposed to sex education begin using contraception methods earlier. Most evidence indicates that exposed women initiate sexual activity earlier. Findings suggest that timing of first pregnancy is not affected and that second pregnancy is postponed. Overall, outcomes from this study support the idea that sex education contributes to promote preventive sexual health.
    Keywords: Sex education; female sexual health; reproductive behavior
    JEL: I28 J13 J15
    Date: 2009–01
  5. By: Sule Akkoyunlu (Socioeconomic Institute, University of Zurich); Frank R. Lichtenberg (Columbia University, Graduate School of Business, New York); Boriss Siliverstovs (KOF Swiss Economic Institute, Federal Institute of Technology, Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich)
    Keywords: Health; Life expectancy, Innovation, Pharmaceuticals, Health care expenditure, Cointegration
    JEL: H51 I12 J18 C22 O33
    Date: 2009–02
  6. By: Stengos, T.; Thomson, B.; Wu, X.
    Date: 2009
  7. By: David Carey; Bradley Herring; Patrick Lenain
    Abstract: In spite of improvements, on various measures of health outcomes the United States appears to rank relatively poorly among OECD countries. Health expenditures, in contrast, are significantly higher than in any other OECD country. While there are factors beyond the health-care system itself that contribute to this gap in performance, there is also likely to be scope to improve the health of Americans while reducing, or at least not increasing spending. This paper focuses on two factors that contribute to this discrepancy between health outcomes and health expenditures in the United States: inequitable access to medical services and subsidized private insurance policies; and inefficiencies in public health insurance. It then suggests two sets of reforms likely to improve the US health-care system. The first is a package of reforms to achieve close to universal health insurance coverage. The second set of reforms relates to payment methods and coverage decisions within the Medicare programme to realign incentives and increase the extent of economic evaluation of different medical procedures.<P>Réforme du système de santé aux États Unis<BR>Malgré certains progrès, les États-Unis ne sont pas très bien placés parmi les pays de l’OCDE pour ce qui est de diverses mesures des résultats de la santé. Or, les dépenses de santé y sont sensiblement plus élevées que dans tout autre pays de l’OCDE. Cette situation contradictoire amène à penser qu’il est possible d’améliorer le système de santé du pays tout en réduisant, ou du moins en n’augmentant pas, les dépenses. Le présent papier examine plus particulièrement deux facteurs qui contribuent à la divergence entre les résultats et les dépenses en matière de santé aux États-Unis : accès inéquitable aux services médicaux et inefficience des subventions pour la souscription de polices d’assurance privées ; et manque d’efficacité de l’assurance de santé publique. Il propose ensuite deux séries de réformes propres à améliorer le système de santé des États-Unis. La première est un ensemble de mesures destinées à assurer la couverture universelle de l’assurance-maladie. La deuxième concerne les méthodes de paiement et les décisions de prise en charge au sein du programme Medicare et vise à réaligner les incitations et à renforcer l’évaluation économique des différents actes médicaux.
    Keywords: moral hazard, aléa moral, espérance de vie, health status, health oucomes, résultats de la santé, life expectancy, health costs, coûts de santé, health expenditure, health subsidies, individual market, marché individuel, adverse selection, sélection adverse, pooling, mandate, tax exclusion, exonération fiscale, avantage Medicare, comparative effectiveness, comparaison de l’efficacité, regroupement de risque, dépenses de santé, assurance santé, subventions pour l’achat des polices d’assurance santé, mandat, Medicare, Medicare advantage
    JEL: C23 H51 I12 O57
    Date: 2009–02–06
  8. By: M.H. Suryanarayana (Indira Gandhi Institute of Development Research)
    Abstract: This paper takes up the issues pertaining to the health sector in Kerala in a larger comparative perspective in the Indian context. It would focus on the incidence of morbidity across socio-economic dimensions and their implications for economic policy. Its major findings are: The level of living of every decile group in Kerala is higher than that of the corresponding group at the all-India level. Extent of inequality in consumption distribution is higher in rural Kerala (North, South and combined) than in rural all-India and higher in urban Kerala (combined only) than in urban all-India. Within Kerala, the southern region is better off in terms of levels of living in both rural and urban sectors. The extent of inequality is also higher in South Kerala than in the North; still incidence of absolute poverty is higher in the North than in the South, reflecting the relatively lower level of standard of living in the former. As regards institutional facilities for health care, proportion of illness treated is higher in Kerala than in India as a whole. Extent of dependence on the public sector for health care is higher in Kerala than in all-India. Opportunity cost of illness is lower in Kerala than in India as a whole. Incidence of morbidity is higher in Kerala than in all-India. Within Kerala as a whole, it is (i) higher among women than men; (ii) higher in the rural than in the urban sector; and (iii) higher in the in the South than in the North. Incidence of morbidity is higher in rural than in urban Kerala and vice versa for all-India. As regards inequality in morbidity, the extent in general is lower in Kerala than in India though levels of morbidity are higher in the former than in the latter. Incidence of morbidity is uniformly higher among the poor than among the non-poor categories in South as well as North Kerala. In general, the poor rely relatively more on the public sector than on the private for treatment of illness as well as for hospitalization. Hence, the pursuit of privatization and public sector reform has to be carried out with due regard to the welfare costs associated with them.
    Keywords: Socio-economic dimension, economic policy, inequality, opportunity cost
    JEL: I10
    Date: 2008–03
  9. By: Rama Joglekar (Indira Gandhi Institute of Development Research)
    Abstract: In India, the out-of-pocket health expenditure by households accounts for around 70 percent of the total expenditure on health. Large out-of-pocket payments may reduce consumption expenditure on other goods and services and push households into poverty. Recently, health insurance has been considered as one of the possible instruments in reducing impoverishing effects of large out-of-pocket health expenditure. In India, health insurance has limited coverage and the present paper studies whether it has been effective so far. Literature defines out-of-pocket health expenditure as catastrophic if its share in the household budget is more than some arbitrary threshold level. In the present paper, we argue that for households below poverty line any expenditure on health is catastrophic as they are unable to attain the subsistence level of consumption. Thus, we take zero percent as a threshold level to define catastrophic health expenditure and examine the impact of health insurance on probability of incurring catastrophic health expenditure.
    Keywords: Out-of-pocket health expenditure, Catastrophic health expenditure, Health insurance
    JEL: I12 I19
    Date: 2008–09
  10. By: Azomahou, Theophile (UNU-MERIT); Diene, Bity (CREA, University of Luxembourg); Soete, Luc (UNU-MERIT, Maastricht University)
    Abstract: We study the behavior of consumption and health investment resulting from shocks undermining health capital accumulation. We examine the effects on subsequent life cycle of long-lived shocks undermining health with either an acceleration of health capital deterioration, or a decrease in health investment efficiency. We also address the issue of the financing of health investment. We provide new evidence based on nonparametric estimations which show complex non-linear interplay between life expectancy and health expenditure. We then develop a benchmark model where consumption and health capital enter additively in the utility function, featuring independence between the returns from ordinary consumption and health. Then, we depart from this setup by assuming non-additive preferences meaning that ordinary consumption also is crucial for health. We show that a shock undermining health which increases health expenditures and weakens the income base, not only affects savings but also compromises the consumption capacity, the human and physical capital of the economy, and undercuts the process of economic development. We also show that the magnitude of the effects strongly depends on the assumed preferences.
    Keywords: consumption, health investments, savings, non-parametric estimation
    JEL: E21 I12 O10
    Date: 2009
  11. By: Kateřina Pavloková (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Growing concern about future sustainability of public budgets in the context of population ageing has given rise to a large debate on the role of age in the context of health care expenditure. Growing evidence on the so called death related costs hypothesis arguing that the positive relationship between age of the cohort and related health care expenditure is the result of growing probability of death changes in an important manner the results of the projections. The aim of this paper is to explore the importance of the death related costs hypothesis in the Czech health expenditure data and the impact of the hypothesis on the projection of the financial sustainability of the Czech health care system.
    Keywords: health care, last year of life, financial sustainability
    JEL: H51
    Date: 2009–02
  12. By: Anna Marriott
    Abstract: There is an urgent need to reassess the arguments used in favour of scaling-up private-sector provision in poor countries. The evidence shows that prioritising this approach is extremely unlikely to deliver health for poor people. Governments and rich country donors must strengthen state capacities to regulate and focus on the rapid expansion of free publicly provided health care, a proven way to save millions of lives worldwide. [OXFAM Briefing Paper]
    Keywords: privae health care, public health care, health care, privatisation,institutional capacities, access to health care , Oxfam, Health Studies
    Date: 2009
  13. By: Jan Høgelund, (Danish National Centre for Social Research, Copenhagen); Anders Holm (Department of Sociology, University of Copenhagen); James McIntosh (Concordia University, Quebec)
    Abstract: Using Danish register and survey data, we examine the effect of a national graded return-to-work program on the probability of sick-listed workers returning to regular working hours. During program participation, the worker receives the normal hourly wage for the hours worked and sickness benefit for the hours off work. When the worker’s health improves, working hours are increased until the sick-listed worker is able to work regular hours. Taking account of unobserved differences between program participants and non-participants, we find that participation in the program significantly increases the probability of returning to regular working hours.
    JEL: C41 I18 J64
    Date: 2009–02
  14. By: Nathalie Grandfils (IRDES institut for research and information in health economics); Catherine Sermet (IRDES institut for research and information in health economics)
    Abstract: The aim of this paper is to compare the evolution of antidepressant consumption in France, Germany and the United Kingdom between 1998 and 2002. Commercial databases (IMS Health) have been used in conjunction with administrative data (PACT for the UK, GKV for Germany and Afssaps for France) to estimate antidepressant consumption in Daily Defined Doses. The main results are: (1) Antidepressant consumption has increased significantly over the last decade in France (x2), Germany (x2.4) and the UK (x3.8); (2) SSRIs are the most heavily consumed drugs in France (67%) and the UK (60%); (3) Germany is distinguished by an overall level of antidepressant consumption twice as low as the other two countries and a relatively low use of SSRI antidepressants (31%), in favour of TCAs. In conclusion, the combined use of administrative and commercial data is possible for an evaluation of the volume of consumption. This study sheds both medical and economic light on the differences in both the level and structure of consumption in these three countries.
    Keywords: antidepressant consumption, SSRI, France, UK, Germany
    JEL: I11 L65
    Date: 2009–02
  15. By: Humphreys, Brad (University of Alberta, Department of Economics); Ruseski, Jane (University of Alberta, Department of Economics)
    Abstract: This paper examines the economics of participation in physical activity by developing a consumer choice model of participation and estimating it using data drawn from the Behavioral Risk Factor Surveillance Survey (BRFSS). Both emphasize that individuals face two distinct decisions: (1) should I participate; and (2) how much time should I spend participating? The results indicate that economic factors like income and opportunity cost of time are important determinants of physical activity and that physical activity is a normal good. Individual characteristics also play an important role in determining the amount of time spent in physical activity. Participation and time spent decline with age. Females, married people, households with children, blacks and hispanics all spend less time engaged in physical activity than males, single people, childless households and whites. Public policy interventions aimed at improving physical activity of Americans targeted to specific sub-populations are likely to be more effective than broad-based policies.
    Keywords: time allocation; physical activity; sport participation
    JEL: I12 I18 J22 L83
    Date: 2009–02–01
  16. By: Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: In standard economic models benevolent governments are the unique actors in charge to tackle the problem of reconciling individual with social wellbeing in presence of negative externalities and insufficient provision of public goods. Some promising practices of grassroot economics suggest however that, even a minoritarian share of concerned individuals and socially responsible corporations which internalise externalities, significantly enhance the opportunities of promoting "sustainable happiness" harmonising creation of economic, social and environmental value.
    Keywords: well-being; sustainable happiness; role; ethical and solidarity initiatives
    JEL: A13
    Date: 2009–01–29
  17. By: Ferreira, Pedro Cavalcanti; Santos, Marcelo; Pessoa, Samuel
    Abstract: This paper studies the impact of HIV/AIDS on per capita income and education. It ex- plores two channels from HIV/AIDS to income that have not been sufficiently stressed by the literature: the reduction of the incentives to study due to shorter expected longevity and the reduction of productivity of experienced workers. In the model individuals live for three periods, may get infected in the second period and with some probability die of Aids before reaching the third period of their life. Parents care for the welfare of the future generations so that they will maximize lifetime utility of their dynasty. The simulations predict that the most affected countries in Sub-Saharan Africa will be in the future, on average, thirty percent poorer than they would be without AIDS. Schooling will decline in some cases by forty percent. These gures are dramatically reduced with widespread medical treatment, as it increases the survival probability and productivity of infected individuals.
    Date: 2009–02–12
  18. By: Campolieti , Michele; Gomez, Rafael; Gunderson, Morley
    Abstract: We study the propensity of disabled persons to engage in volunteer activity with the Participation and Activity Limitation Survey (PALS) -- a unique Canadian dataset which provides extensive information on disabled persons as well as volunteering behaviour. Our principal focus is on the effects of various income support programs on disabled person’s participation in volunteer activities. We find that certain income support programs (e.g., workers’ compensation) are associated with decreases in the probability of volunteering while others (e.g., Pension Plans) are associated with increases in the propensity to volunteer. The reason is that not all income support programs are identical with respect to their implications for unpaid work. There are some – like workers compensation – that embody strong disincentives to volunteering while others like public Pensions that explicitly encourage unpaid work. Our conclusion is that program characteristics can significantly affect volunteering. This conclusion is further supported when we look at other income support programs that embody ambiguous or no incentive effects. As one would anticipate, these ‘incentive neutral’ programs have no significant impact on volunteering. The relevance of these results to both theories of volunteerism and public policy is discussed.
    Keywords: Disability, Income Support Programs, Incentive Effects, Volunteer Activity
    JEL: J14 J48
    Date: 2009–02–16
  19. By: Marc Pomp; Suncica Vujic
    Abstract: Health expenditure as a share of GDP rises in most OECD countries. One of the possible causes is the so-called Baumol effect, which may arise if labour productivity in health care grows more slowly than in the overall economy. If in addition demand for health care is inelastic, then the share of health spending in GDP will rise over time. This paper estimates the Baumol effect in health spending, using a panel data set of OECD countries. We do indeed find that one percentage growth in economy-wide labour productivity is associated with about 0.5 percent growth in real health spending. This implies that economy-wide productivity growth leads to higher real health spending.
    Keywords: Baumol effect; health spending; panel data
    JEL: H51 I11
    Date: 2008–12
  20. By: Karakaya, Güngör
    Abstract: In this paper we analyze the problem of population ageing in terms of non-medical care needs of persons who are dependent or have lost their autonomy, in order to provide the various public and private administrations active in these fields with some food for thought. The anticipated increase in dependency poses significant challenges in terms of needs evolution and financing. Using administrative data on the Belgian population to build indicators on the prevalence of dependency at home in the three regions in 2001, we find that the likelihood of a sustained increase in the Flemish prevalence rates ultimately amplifies the magnitude of the financing problems that the Flemish dependency insurance scheme has experienced since its first years of operation. Results also show that the smaller increases or the decreases (according to the scenario selected) expected in Wallonia and Brussels are likely to mitigate concern about the sustainability of any long-term care insurance in Wallonia and therefore to facilitate its eventual introduction.
    Keywords: Long-term care; Old age assistance; Demographic changes; Regional inequalities; Projection
    JEL: J14 I12 I18 J11
    Date: 2009
  21. By: Chulhee Lee
    Abstract: This paper investigates patterns of socioeconomic difference in the wartime morbidity and mortality of black Union Army soldiers. Among the factors that contributed to a lower probability of contracting and dying from diseases were (1) lighter skin color, (2) a non-field occupation, (3) residence on a large plantation, and (4) residence in a rural area prior to enlistment. Patterns of disease-specific mortality and timing of death suggest that the differences in the development of immunity against diseases and in nutritional status prior to enlistment were responsible for the observed socioeconomic differences in wartime health. For example, the advantages of light-skinned soldiers over dark-skinned and of enlisted men formerly engaged in non-field occupations over field hands resulted from differences in nutritional status. The lower wartime mortality of ex-slaves from large plantations can be explained by their better-developed immunity as well as superior nutritional status. The results of this paper suggest that there were substantial disparities in the health of the slave population on the eve of the Civil War.
    JEL: N31 N41
    Date: 2009–02
  22. By: Kyna Fong; Michael Schwarz
    Abstract: This paper applies ideas from mechanism design to model procurement of prescription drugs. We present a mechanism for government-funded market-driven drug procurement that achieves very close to full static efficiency -- all members have access to all but at most a single drug -- without distorting incentives for innovation.
    JEL: D44 I11
    Date: 2009–02
  23. By: Theodore J. Joyce; Andrew D. Racine; Cristina Yunzal-Butler
    Abstract: We investigate the association between the timing of enrollment in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and smoking among prenatal WIC participants. We use WIC data from eight states participating in the Pregnancy Nutrition Surveillance System (PNSS). Women who enroll in WIC in the first trimester of pregnancy are 2.7 percentage points more likely to be smoking at intake than women who enroll in the third trimester. Among participants who smoked before pregnancy and at prenatal WIC enrollment, those who enrolled in the first trimester are 4.5 percentage points more likely to quit smoking 3 months before delivery and 3.4 percentage points more likely to quit by postpartum registration, compared with women who do not enroll in WIC until the third trimester. Overall, early WIC enrollment is associated with higher quit rates, although changes are modest when compared to the results from smoking cessation interventions for pregnant women.
    JEL: I38
    Date: 2009–02
  24. By: Janet Currie; Stefano DellaVigna; Enrico Moretti; Vikram Pathania
    Abstract: We investigate the health consequences of changes in the supply of fast food using the exact geographical location of fast food restaurants. Specifically, we ask how the supply of fast food affects the obesity rates of 3 million school children and the weight gain of over 1 million pregnant women. We find that among 9th grade children, a fast food restaurant within a tenth of a mile of a school is associated with at least a 5.2 percent increase in obesity rates. There is no discernable effect at .25 miles and at .5 miles. Among pregnant women, models with mother fixed effects indicate that a fast food restaurant within a half mile of her residence results in a 2.5 percent increase in the probability of gaining over 20 kilos. The effect is larger, but less precisely estimated at .1 miles. In contrast, the presence of non-fast food restaurants is uncorrelated with obesity and weight gain. Moreover, proximity to future fast food restaurants is uncorrelated with current obesity and weight gain, conditional on current proximity to fast food. The implied effects of fast-food on caloric intake are at least one order of magnitude smaller for mothers, which suggests that they are less constrained by travel costs than school children. Our results imply that policies restricting access to fast food near schools could have significant effects on obesity among school children, but similar policies restricting the availability of fast food in residential areas are unlikely to have large effects on adults.
    JEL: I1 I18 J0
    Date: 2009–02
  25. By: Daron Acemoglu; Amy Finkelstein; Matthew J. Notowidigdo
    Abstract: Health expenditures as a share of GDP have more than tripled over the last half century. A common conjecture is that this is primarily a consequence of rising real per capita income, which more than doubled over the same period. We investigate this hypothesis empirically by instrumenting for local area income with time-series variation in global oil prices between 1970 and 1990 interacted with cross-sectional variation in the oil reserves across different areas of the Southern United States. This strategy enables us to capture both the partial equilibrium and the local general equilibrium effects of an increase in income on health expenditures. Our central estimate is an income elasticity of 0.7, with an elasticity of 1.1 as the upper end of the 95 percent confidence interval. Point estimates from alternative specifications fall on both sides of our central estimate, but are almost always less than 1. We also present evidence suggesting that there are unlikely to be substantial national or global general equilibrium effects of rising income on health spending, for example through induced innovation. Our overall reading of the evidence is that rising income is unlikely to be a major driver of the rising health share of GDP.
    JEL: H51 I1
    Date: 2009–02

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