Unbalanced Growth and Health Care Expenditure

20 Pages Posted: 28 Aug 2014

See all articles by Chun-Yu Ho

Chun-Yu Ho

State University of New York (SUNY) - Department of Economics

Xin Li

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Weimin Zhou

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: October 2014

Abstract

Baumol's model of unbalanced growth implies that health care expenditure (HCE) is driven by wage increases in excess of productivity growth. However, it remains unclear whether the HCE in developing countries is affected by the same factor. This paper tests this hypothesis by using China provincial panel data. We show that HCE grows more rapidly if economy‐wide wage growth exceeds productivity growth in China. The results are robust to the use of housing price as an instrumental variable for the economy‐wide nominal wage and the inclusion of real GDP growth, demographic structure, government deficit, pollution emissions and health sector quality as control variables. Furthermore, our findings show that Baumol's cost disease plays a more important role in the less economically developed western regions in which the rural–urban migration is less pronounced.

Keywords: Health care expenditure, price, Baumol's unbalanced growth, China

Suggested Citation

Ho, Chun-Yu and Li, Xin and Zhou, Weimin, Unbalanced Growth and Health Care Expenditure (October 2014). Economics of Transition, Vol. 22, Issue 4, pp. 739-758, 2014, Available at SSRN: https://ssrn.com/abstract=2488230 or http://dx.doi.org/10.1111/ecot.12051

Chun-Yu Ho (Contact Author)

State University of New York (SUNY) - Department of Economics ( email )

1400 Washington Ave
Albany, NY 12222
United States

Xin Li

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Weimin Zhou

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
186
PlumX Metrics