On the Rise of Health Spending and Longevity
50 Pages Posted: 22 Mar 2010
There are 2 versions of this paper
On the Rise of Health Spending and Longevity
Date Written: December 1, 2009
Abstract
We use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. We estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a “synergy” or interaction effect which helps explain an additional 37% increase in health spending. We estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10%.
Keywords: demand for health, health spending, insurance, technological change, longevity
JEL Classification: I10, I38, J26
Suggested Citation: Suggested Citation
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