nep-hea New Economics Papers
on Health Economics
Issue of 2017‒12‒03
twenty-one papers chosen by
Yong Yin
SUNY at Buffalo

  1. A Two-Phenotype Model of Immune Evasion by Cancer Cells By Bayer, Péter; Brown, Joel; Stankova, Katerina
  2. The Good Outcomes of Bad News. A Randomized Field Experiment on Formatting Breast Cancer Screening Invitations By Bertoni, M.; Corazzini, L.; Robone, S.;
  3. Labour Supply and Informal Care Supply: The Impacts of Financial Support for Long-Term Elderly Care By Bruce Hollingsworth; Asako Ohinata; Matteo Picchio; Ian Walker
  4. Sickness absence from work in Spain: are there gender differences? By López-Mourelo, Elva; Alba Ramírez, Alfonso
  5. Is there a strategy in China’s health official development assistance to African countries? By Marlène GUILLON; Jacky MATHONNAT
  6. A Holistic Health Care of Thai?s Elderlies in Nursing Home By WIRAWAN KLAYHIRAN
  7. Ranking the harm of non-medically used prescription opioids in the UK By van Amsterdam, Jan; Phillips, Lawrence D.; Henderson, Graeme; Bell, James; Bowden-Jones, Owen; Hammersley, Richard; Ramsey, John; Taylor, Polly; Dale-Perera, Annette; Melichar, Jan; van den Brink, Wim; Nutt, David
  8. How a Results-Based Financing approach can contribute to the health Sustainable Development Goals - Policy-oriented lessons: what we know, what we need to know and don’t yet know By Jacky MATHONNAT; Aurore PELISSIER
  9. Therapeutic Translation in the Wake of the Genome By Manuel I. Hermosilla; Jorge A. Lemus
  10. Means-Testing Federal Health Entitlement Benefits By Andrew Samwick
  11. The Lifetime Costs of Bad Health By Mariacristina De Nardi; Svetlana Pashchenko; Ponpoje Porapakkarm
  12. Impact of Comprehensive Smoking Bans on the Health of Infants and Children By Kerry Anne McGeary; Dhaval M. Dave; Brandy J. Lipton; Timothy Roeper
  13. Exploding Asthma and ADHD Caseloads: The Role of Medicaid Managed Care By Anna Chorniy; Janet Currie; Lyudmyla Sonchak
  14. Antibiotic resistance in Romania: An economic and medical challenge By Aluculesei, Bogdan Cătălin
  15. Medicaid and Financial Health By Kenneth Brevoort; Daniel Grodzicki; Martin B. Hackmann
  16. A Reminder to Pay Less for Healthcare: take-up of Increased Reimbursement in a large-scale randomized field experiment By Raf Van Gastel; Tim Goedemé; Julie Janssens; Eva Lefevere; Rik Lemkens
  17. Neurotechnology and society: Strengthening responsible innovation in brain science By OECD
  18. The Effects of Fluoride in the Drinking Water By Aggeborn, Linuz; Öhman, Mattias
  19. The effects of access to health insurance: Evidence from a regression discontinuity design in Peru By Bernal Lobato, Noelia; Carpio, M.A.; Klein, Tobias
  20. Fit for the labour market? An effort to reduce inactivity traps in the transition from benefit to work in the Belgian sickness and disability system By Tine Hufkens; Linde Buysse; Natascha; Gerlinde Verbist
  21. Is Health Care Infected by Baumol’s Cost Disease? Test of a New Model By Akinwande A. Atanda; Andrea K. Menclova; W. Robert Reed

  1. By: Bayer, Péter (General Economics 1 (Micro)); Brown, Joel (moffitt cancer center); Stankova, Katerina (DKE Scientific staff)
    Abstract: We propose a model with two types of cancer cells differentiated by their defense mechanisms against the immune system. ``Selfish'' cancer cells develop defense mechanisms that benefit the individual cell, whereas ``cooperative'' cells deploy countermeasures that increase the chance of survival of every cell. Our phenotypes capture the two main features of the tumor's efforts to avoid immune destruction, crypticity against immune cells for the selfish cells, and tumor-induced immunosuppression for the cooperative cells. We identify steady states of the system and show that only homogeneous tumors can be stable in both size and composition. We show that under generic parameter values, a tumor of selfish cells is more benign than a tumor of cooperative cells, and that a treatment against cancer crypticity may promote immunosuppression and increase cancer growth.
    Keywords: Cancer heterogeneity, cancer ecology and evolution, immunoediting, Immunotherapy, immunosuppression
    Date: 2017–11–21
  2. By: Bertoni, M.; Corazzini, L.; Robone, S.;
    Abstract: We ran a population-level randomized field experiment to ascertain whether a costless manipulation of the informational content (restricted or enhanced information) and the framing (gain or loss framing) of the invitation letter to the national breast cancer screening program affects the take-up rate. Our experiment involved more than 6,000 women aged 50-69 targeted by the screening program of the Province of Messina in Sicily, randomly assigned to receive different invitation letter formats. Using administrative data from the Local Health Authority archives, we show that giving enhanced loss-framed information about the risks of not having a mammography increases take-up rate by about 25 percent with respect to all other treatments (no information; restricted gain-framed information; restricted loss-framed information; enhanced gain-framed information). Results are stronger for subjects living farther away from the screening site. For them, the manipulation may indicate higher perceived risks of negative outcomes that makes it worthwhile to participate in the screening program, in spite of longer travel time.
    Keywords: screening; breast cancer; randomized field experiment; framing; information disclosure; nudging;
    JEL: C93 H51 I11 I18
    Date: 2017–11
  3. By: Bruce Hollingsworth (Lancaster University, United Kingdom); Asako Ohinata (Department of Economics, University of Leicester, United Kingdom; CentER, Tilburg University, The Netherlands.); Matteo Picchio (Department of Economics and Social Sciences, Marche Polytechnic University, Ancona, Italy; Sherppa, Ghent University, Belgium; IZA, Germany.); Ian Walker (Management School, Lancaster University, United Kingdom; IZA, Germany.)
    Abstract: We investigate the impact of a policy reform, which introduced free formal personal care for all those aged 65 and above, on caregiving behaviour. Using a difference-indifferences estimator, we estimate that the free formal care reduced the probability of co-residential informal caregiving by 12.9%. Conditional on giving co-residential care, the mean reduction in the number of informal care hours is estimated to be 1:2 hours per week. The effect is particularly strong among older and less educated caregivers. In contrast to co-residential informal care, we find no change in extra-residential caregiving behaviour. We also observe that the average labour market participation and the number of hours worked increased in response to the policy introduction.
    Keywords: Long-term elderly care; ageing; financial support; informal caregiving; difference-in-differences
    JEL: C21 D14 I18 J14
    Date: 2017–11
  4. By: López-Mourelo, Elva; Alba Ramírez, Alfonso
    Abstract: We use a sample of social security records containing work histories and sick leave episodes to investigate gender differences in the incidence and duration of absence from work due to sickness in Spain. For sick leave incidence we apply a competing risk model to a panel of newly employed workers who can be followed for two years until an episode of sick leave occurs or the job ends. For the duration of sick leave spells, we estimate a Weibull model. We distinguish between sick leave due to occupational illness or injury and sick leave due to common disease or accident. This distinction is important because only for the latter women have higher incidence and longer duration than men. In this respect, the presence of children under 3 years of age in the household becomes a significant explanatory factor.
    Keywords: Proportional hazard model; Competing risks; Cumulative incidence; Gender differences; Sick leave
    JEL: J81 J28 J14
    Date: 2017–11–01
  5. By: Marlène GUILLON; Jacky MATHONNAT (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: Chinese health official development assistance (ODA) to Africa has largely increased since the third Forum on China-Africa Cooperation (FOCAC) in 2006. Even if China now ranks among the top ten bilateral donors for health aid in Africa few studies have assessed the determinants of Chinese health ODA to African countries. Our objective is to study the factors associated with Chinese health ODA to Africa in the 2006-2013 period. We investigate the role of three types of factors that might influence the allocation of Chinese health aid: the needs of recipient countries, their merits and the self-interest of China. Chinese health ODA is measured using the AidData's Global Chinese Official Finance Dataset, 2000-2014,Version1.0. In total, 345 health aid projects were financed by China in Africa between 2006 and 2013, accounting for a total amount of 2014 US$764 million. On these 345 projects, 143 (41%) correspond to the dispatch of medical teams, 107 (31%) to the sending of medical equipment or drugs and 76 (22%) to health infrastructure construction or rehabilitation. We study the factors associated with the number of health projects and the amount of health ODA received each year by African countries. We stratify the analysis by types of projects (medical team dispatches/infrastructure and medical equipment or drugs projects). Over the 2006-2013 period, Chinese health aid appeared responsive to the economic needs of African countries and unrelated to the quality of their governance. While Chinese aid allocation decision favored countries with limited ability to finance health projects our results show no link between direct health needs of African countries and the volume of Chinese health aid they received. We find no strong evidence that Chinese health aid allocation decisions favored natural resources-rich countries while our results only show small magnitude associations between economic ties to China and the volume of Chinese health ODA received. Finally, our results confirm the idea that health aid might me used by China as part of its foreign policy since non-adherence to the one-China policy makes the receipt of Chinese health aid very unlikely.
    Keywords: Health aid, Aid allocation, China, Africa.
    JEL: F35
    Date: 2017–11
  6. By: WIRAWAN KLAYHIRAN (Boromrajajonani College of Nursing, Ratchaburi)
    Abstract: AbstractPurpose: To describe a holistic health care of Thai?s elderlies in nursing home about holistic health care approach in four dimensions included physical health care, mental health care, social health care and spiritual health care. . Design and Methods: Qualitative research with a purposive sample of Thai?s elderlies (n = 15) and Caregivers (n = 3), using in-depth interview to explore rich qualitative data, using content and thematic analysis were conducted. Research ethic was approved by human subjects institutional review board, informed consent was obtained in all key informants.Results: There were 4 key findings as follows: Firstly, physical health care means focusing on hygiene care with love from caregivers like they got it from descendant. Their purposes were clean and comfort body. Secondly, mental health care means they had someone who was ready to be a listener and a good friend in lonely time. Thirdly, social health care means they can see visitors in regularly that improve to get better from a family loss feeling problems. Finally, spiritual health care means they can back their home and enjoy their families in the end of life with dignity. Implications: Nurses and nursing students may apply these data to understand better holistic health care approach of Thai?s elderlies in nursing home. In nursing curriculum may use these data developed learning outcomes of nursing students when they learn this topic. Nowadays, this issue is an important learning subject for young generation because they are a future nurses in aging society of Thailand.
    Keywords: holistic health care, elderly, nursing home
    Date: 2017–10
  7. By: van Amsterdam, Jan; Phillips, Lawrence D.; Henderson, Graeme; Bell, James; Bowden-Jones, Owen; Hammersley, Richard; Ramsey, John; Taylor, Polly; Dale-Perera, Annette; Melichar, Jan; van den Brink, Wim; Nutt, David
    Abstract: A panel of nine experts applied multi-criteria decision analysis (MCDA) to determine the relative overall harm to users and harms to others of street heroin (injected and smoked) and eleven non-medically used prescription opioids. The experts assessed harm scores for each of the 13 opioids on each of 20 harm criteria, weighted the criteria and explored the resulting weighted harm scores for each opioid. Both forms of heroin scored very high: overall harm score of 99 for injected heroin and 72 for smoked heroin on a scale of 0–100. The main feature that distinguishes both forms of street heroin use is that their harm to others is more than five times that of the other eleven opioids. The overall harm score of fentanyl (including injection of fentanyl extracted from patches) and diamorphine (medically prescribed form of heroin) was 54 and 51, respectively, whereas that of orally used opioids ranged from 32 (pethidine) to 11 (codeine-containing pharmaceuticals). Injected street heroin, fentanyl and diamorphine emerged as most harmful to users, with the latter two very low in harm to others. Pethidine, methadone, morphine and oxycodone are also low in harm to others, while moderate in harm to users. We conclude that the overall harms of non-medically used prescription opioids are less than half that of injected street heroin. These data may give a basis for precautionary regulatory measures that should be considered if the rising trend in non-medical use of prescription opioids were to become evident in the UK.
    Keywords: opioids; MCDA; risk assessment; ranking; prescription drugs; harm; street heroin
    JEL: G32
    Date: 2015–12
  8. By: Jacky MATHONNAT (Cerdi - Université Clermont Auvergne); Aurore PELISSIER (FERDI)
    Abstract: The ‘results-based financing’ (RBF) approach, an umbrella term, occupies a particularly important place in the debates regarding meeting the challenge of ‘better health for all at all ages’ as stated in the Sustainable Development Goals 3. Our analysis of the RBF schemes results published in the literature underlines five major points. 1. The RBF approach is a very promising one, but highly context dependent. 2. There is no silver bullet. It should be based on a sound realistic theory of change with incentives relevant to the specificity of every context. 3. RBF includes not only financial incentives and can contribute to the reform of the health care system. 4. It appears very important to combine RBF on both the supply side and demand side (as conditional cash transfers, vouchers, etc.) to create positive synergies. 5. There are many gray areas on issues important to decision-makers. More rigorous research (including qualitative) is needed to create valuable public goods on this crucial issue.
    Keywords: objectifs de développement durable, santé, Health, Sustainable development goals
    Date: 2017–10
  9. By: Manuel I. Hermosilla; Jorge A. Lemus
    Abstract: The completion of the Human Genome Project (“HGP”) led many scientists to predict a swift revolution in human therapeutics. Despite large advances, however, this revolution has been slow to materialize. We investigate the hypothesis that this slow progress may stem from the large amounts of biological complexity unveiled by the Genome. Our test relies on a disease-specific measure of biological complexity, constructed by drawing on insights from Network Medicine (Barabasi et al., 2011). According to this measure, more complex diseases are those associated with a larger number of genetic associations, or with higher centrality in the Human Disease Network (Goh et al., 2007). With this measure in hand, we estimate the rate of translation of new science into early stage drug innovation by focusing on a leading type of genetic epidemiological knowledge (Genome-Wide Association Studies), and employing standard methods for the measurement of R&D productivity. For less complex diseases, we find a strong and positive association between cumulative knowledge and the amount of innovation. This association weakens as complexity increases, becoming statistically insignificant at the extreme. Our results therefore suggest that biological complexity is in part responsible for the slower-than-expected unfolding of the therapeutical revolution set in motion by the HGP.
    JEL: I1 L65 O30
    Date: 2017–11
  10. By: Andrew Samwick
    Abstract: Recent federal legislation has linked the price paid for health insurance benefits to current income. Under the Patient Protection and Affordable Care Act of 2010, individuals and families with income as high as 400 percent of the federal poverty level are eligible for premium tax credits that limit their health insurance premiums to under 10 percent of their income. Under the Medicare Modernization Act of 2003, higher-income beneficiaries face income-related premiums over three times the standard premium for Part B coverage. For workers at or near retirement age, means-testing based on current income provides an incentive for early retirement, dissaving, and income manipulation, raising concerns about the efficiency of such means-testing. Further, current income is subject to short-term fluctuations, making it a noisy predictor of ability to pay. Using the Health and Retirement Study and linked Social Security earnings histories, this paper introduces a measure of lifetime income that compares favorably to current income as a basis for means-testing. It offers less short-term variation in premiums while improving incentives for pre-retirement work and saving.
    JEL: H51 I13
    Date: 2017–11
  11. By: Mariacristina De Nardi; Svetlana Pashchenko; Ponpoje Porapakkarm
    Abstract: Health shocks are an important source of risk. People in bad health work less, earn less, face higher medical expenses, die earlier, and accumulate much less wealth compared to those in good health. Importantly, the dynamics of health are much richer than those implied by a low-order Markov process. We first show that these dynamics can be parsimoniously captured by a combination of some lag-dependence and ex-ante heterogeneity, or health types. We then study the effects of health shocks in a structural life-cycle model with incomplete markets. Our estimated model reproduces the observed inequality in economic outcomes by health status, including the income-health and wealth-health gradients. Our model has several implications concerning the pecuniary and non-pecuniary effects of health shocks over the life-cycle. The (monetary) lifetime costs of bad health are very concentrated and highly unequally distributed across health types, with the largest component of these costs being the loss in labor earnings. The non-pecuniary effects of health are very important along two dimensions. First, individuals value good health mostly because it extends life expectancy. Second, health uncertainty substantially increases lifetime inequality by affecting the variation in lifespans.
    JEL: E21 H31 I14
    Date: 2017–10
  12. By: Kerry Anne McGeary; Dhaval M. Dave; Brandy J. Lipton; Timothy Roeper
    Abstract: As evidence of the negative effects of environmental tobacco smoke (ETS) has mounted, an increasingly popular public policy response has been to impose restrictions on smoking through 100% smoke-free bans. Yet sparse information exists regarding the impact these smoking bans at the state and local levels have on the health of children and infants. A rationale for expansion of smoke-free laws implicitly presumes that potential public health gains from reducing adult cigarette consumption and declines in adult ETS exposure extend to children. However, if smokers compensate by shifting their consumption of cigarettes from public venues that impose a 100% smoke free ban to smoking at home, then these policies may have a harmful effect on children and infants. This study provides comprehensive estimates of how 100% smoke-free regulations impact the venue of smoking, smoking behaviors, and the health of children and infants. Using models that exploit state- and county-level changes to smoking ban legislation over time, estimates suggest that smoking bans have improved the health of both infants and children, mainly through implementation of more comprehensive bans. Further, we find no evidence of compensatory behaviors among smokers (both smokers with and without children in the household), and actually find that the bans had a positive spillover effect in terms of reducing smoking inside the home – an effect which may further explain the improvement in infant and children’s health.
    JEL: D1 H0 I1 K0
    Date: 2017–11
  13. By: Anna Chorniy; Janet Currie; Lyudmyla Sonchak
    Abstract: In the U.S., nearly 11% of school-age children have been diagnosed with ADHD, and approximately 10% of children suffer from asthma. In the last decade, the number of children diagnosed with these conditions has inexplicably been on the rise. This paper proposes a novel explanation of this trend. First, the increase is concentrated in the Medicaid caseload nationwide. Second, nearly 80% of states transitioned their Medicaid programs from fee-for-service (FFS) reimbursement to managed care (MMC) by 2016. Using Medicaid claims from South Carolina, we show that this change contributed to the increase in asthma and ADHD caseloads. Empirically, we rely on exogenous variation in MMC enrollment due a change in the “default” Medicaid plan from FFS or MMC, and an increase in the availability of MMC. We find that the transition from FFS to MMC explains most of the rise in the number of Medicaid children being treated for ADHD and asthma. These results can be explained by the incentives created by the risk adjustment and quality control systems in MMC.
    JEL: I11 I13
    Date: 2017–10
  14. By: Aluculesei, Bogdan Cătălin
    Abstract: The use of antibiotics, without regard to the importance of first obtaining a prescription, is one of the current challenges, both in health and economic terms. At the global level, resistance to different classes of antibiotics is developing at an alarming rate, and the effects over time are worrying. Romania is one of the European countries facing this problem at the macro level, with the latest statistical data exposing this alarming situation. The lack of basic knowledge of the population regarding the purchase of medication and the habit of administering treatment without the clinician’s advice make this situation difficult to improve. This article discusses the importance of adequate education in antibiotic use, proposing concrete measures to improve the current situation. This study is based on results obtained by the author in previous research on antibiotic resistance in children diagnosed with unitary tract infection in the Braşov area. Thus, the need to apply the proposed solutions is based on the reality found in hospitals.
    Keywords: urinary tract infections; UTI; antibiotic use; antibiotics; resistance to antibiotics
    JEL: I12
    Date: 2017–04
  15. By: Kenneth Brevoort; Daniel Grodzicki; Martin B. Hackmann
    Abstract: This paper investigates the effects of the Medicaid expansion provision of the Affordable Care Act (ACA) on households' financial health. Our findings indicate that, in addition to reducing the incidence of unpaid medical bills, the reform provided substantial indirect financial benefits to households. Using a nationally representative panel of 5 million credit records, we find that the expansion reduced unpaid medical bills sent to collection by $3.4 billion in its first two years, prevented new delinquencies, and improved credit scores. Using data on credit offers and pricing, we document that improvements in households' financial health led to better terms for available credit valued at $520 million per year. We calculate that the financial benefits of Medicaid double when considering these indirect benefits in addition to the direct reduction in out-of-pocket expenditures.
    JEL: D14 H51 I13
    Date: 2017–11
  16. By: Raf Van Gastel; Tim Goedemé; Julie Janssens; Eva Lefevere; Rik Lemkens
    Abstract: We evaluate how a simple letter and flyer sent to a low-income group stimulates the participation in a beneficial health insurance plan. Using a large-scale randomized field experiment we study the effect of contacting potential beneficiaries on the take-up of the Increased Reimbursement (IR) for healthcare in Belgium. We find a fourfold increase in the take-up of IR, with large differences across geographic areas. The group that remains without IR is, on average, less vulnerable than the group that takes up IR in response to the letter. As such, the mailing arguably succeeds in reaching out to the target population.
    Keywords: accessible health care, field experiment, Increased Reimbursement, Nudging, RCT
    JEL: I10 I13 I18 C93
    Date: 2017–11
  17. By: OECD
    Abstract: Large-scale research and development programmes in neuroscience are giving rise to a host of new approaches, techniques and capacities to understand, read and intervene in the human brain. Some of these technologies reframe how we understand mental health and cognition, while others promise new applications for treating disease and even enhancing human capabilities. These developments in neuroscience and associated technologies have many ethical, legal and social implications including issues of product safety, human enhancement, dual use, privacy, and human identity. There is broad agreement among stakeholders that social aspects of brain research must be examined alongside the scientific and technical ones. In fact, good ideas for achieving such integration have emerged within the field of governance of emerging technology and within the national brain initiatives themselves. This report identifies, and seeks to address, key challenges for realising the responsible development of neurotechnology. In particular, the report analyses frameworks and mechanisms for integrating social concerns in the early development of technology, and discusses best practices for research funders across the public and private sector.
    Date: 2017–11–30
  18. By: Aggeborn, Linuz (Department of Government at Uppsala University, Uppsala Center for Fiscal Studies and Uppsala Center for Labor Studies); Öhman, Mattias (Institute for Housing and Urban Research (IBF) and Department of Women's and Children's Health at Uppsala University)
    Abstract: Fluoridation of the drinking water is a public policy whose aim is to improve dental health. Although the evidence is clear that fluoride is good for dental health, concerns have been raised regarding potential negative effects on cognitive development. We study the effects of fluoride exposure through the drinking water throughout life on cognitive and non-cognitive ability, math test scores and labor market outcomes in a large-scale setting. We use a rich Swedish register dataset for the cohorts born 1985–1992 in the main analysis, together with drinking water fluoride data. To estimate the effects, we exploit intra-municipality variation of fluoride, stemming from an exogenous variation in the bedrock. Taking all together, we investigate and confirm the long-established positive relationship between fluoride and dental health. Second, we find precisely estimated zero-effects on cognitive ability, non-cognitive ability and math test scores for fluoride levels in Swedish drinking water. Third, we find that fluoride improves later labor market outcomes, which indicates that good dental health is a positive factor on the labor market.
    Keywords: fluoride; cognitive development; labor market outcomes; dental health
    JEL: H42 I10 I18
    Date: 2017–10–24
  19. By: Bernal Lobato, Noelia (Tilburg University, School of Economics and Management); Carpio, M.A.; Klein, Tobias (Tilburg University, School of Economics and Management)
    Abstract: In many countries large parts of the population do not have access to health insurance. Peru has made an effort to change this in the early 2000’s. The institutional setup gives rise to the rare opportunity to study the effects of health insurance coverage exploiting a sharp regression discontinuity design. We find large effects on utilization that are most pronounced for the provision of curative care. Individuals seeing a doctor leads to increased awareness about health problems and generates a potentially desirable form of supplier-induced demand: they decide to pay themselves for services that are in short supply.
    Date: 2017
  20. By: Tine Hufkens; Linde Buysse; Natascha; Gerlinde Verbist
    Abstract: In the context of ‘social investment’, European welfare states underline increasingly the importance for the long-term development of human capital and labour market integration. The emphasis is put on individual empowerment and making work pay. In Belgium this evolution has been translated into several measures that aim to increase labour market participation and to tackle inactivity traps. In this article we study the financial added value of the transition from a full sickness benefit to (part time) work. Besides, we look at the adequacy of this new situation compared to the poverty threshold. In an effort to strengthen the financial work incentive, we construct an alternative re-integration system for sickness and disability beneficiaries and look at its impact on inactivity traps and poverty risks. We use a simulation model for hypothetical families that allows to calculate the impact of socio-economic transitions on the net disposable household income. We find that the financial returns of working are substantial when people start working at the same average income level as before the period of sickness, but not if people start working at a lower wage. For single-earners or single parents that start working at a minimum-wage we find strong inactivity traps.
    Keywords: Employment, in-work poverty, Long-term sickness, inactivity traps, reintegration, active labour market policy
    Date: 2017–11
  21. By: Akinwande A. Atanda; Andrea K. Menclova (University of Canterbury); W. Robert Reed (University of Canterbury)
    Abstract: Rising health care costs are a policy concern across the OECD and relatively little consensus exists concerning their causes. One explanation that has received revived attention is Baumol’s Cost Disease (BCD). However, developing a theoretically appropriate test of BCD has been a challenge. In this paper, we construct a two-sector model firmly based on Baumol’s axioms. We then derive several testable propositions. In particular, the model predicts that: 1) the share of total labor employed in the health care sector and (2) the relative price index of the health and non-health care sectors should both be positively related to economy-wide productivity. The model also predicts that (3) the share of labor in the health sector will be negatively related, and (4) the ratio of prices in the health and non-health sectors unrelated, to the demand for non-health services. Using annual data from 28 OECD countries over the years 1995-2016 and from 14 U.S. industry groups over the years 1947-2015, we find little evidence to support the predictions of BCD once we address spurious correlation due to coincident trending and other econometric issues.
    Keywords: Baumol’s Cost Disease, health care industry, panel data
    JEL: I11 J30 E24
    Date: 2017–11–01

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