The Political Economy of Health Care Finance
CORE Discussion Paper No. 2007/31
32 Pages Posted: 17 Aug 2007
Date Written: April 2007
We present a model of political competition, in a multi-dimensional policy space and with policy-oriented candidates, to analyze the problem of health care finance. In our model, health care is either financed publicly (by means of general taxation) or privately (by means of a copayment). The extent of these two components (as well as the overall tax schedule) is the outcome of the process of political competition. Our results highlight, from a political-economy perspective, the key role of technological change in explaining the widely observed phenomenon, in advanced democracies, of a rising share of total economic resources spent on health.
Keywords: political competition, health care finance, ideological equilibrium, technology
JEL Classification: D72, H51, I18
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