Understanding Growth Patterns in US Health Care Expenditures

Forthcoming, Journal of the European Economic Association

43 Pages Posted: 30 Mar 2017 Last revised: 28 Feb 2018

See all articles by Alex R. Horenstein

Alex R. Horenstein

University of Miami - School of Business Administration - Department of Economics

Manuel Santos

University of Miami - School of Business Administration - Department of Economics

Date Written: September 14, 2017

Abstract

We study the steady upward trend of Health Care Expenditures (HCE) over GDP for a sample of OECD countries between 1970 and 2007. While the US is clearly an outlier, almost all of the additional increase in US HCE happened during the 1978-1990 period. We perform two growth accounting exercises to explore sources of variability of HCE over GDP across countries. In the first growth accounting exercise based on value added we find that factor accumulation is unable to replicate the observed growth patterns. We also show that the additional increase in markups in the US corporate medical sector mimics well the ratio of HCE over GDP in the US. This suggests that differences in the relative price of health care – rather than technology, product quality, and factor accumulation – could explain the divergent growth patterns of HCE over GDP across these countries. In the second growth accounting exercise, we filter out prices from HCE over GDP, and confirm that there is very little variability for the product quality residual to explain the variation in HCE across countries

Keywords: Medical Care Expenditure Gap, Growth Accounting, Value Added, Relative Price of Medical Care, Price Elasticity.

JEL Classification: I10, I11, I18, E31

Suggested Citation

Horenstein, Alex R. and Santos, Manuel, Understanding Growth Patterns in US Health Care Expenditures (September 14, 2017). Forthcoming, Journal of the European Economic Association, Available at SSRN: https://ssrn.com/abstract=2942535 or http://dx.doi.org/10.2139/ssrn.2942535

Alex R. Horenstein (Contact Author)

University of Miami - School of Business Administration - Department of Economics ( email )

P.O. Box 248126
Coral Gables, FL 33124-6550
United States

Manuel Santos

University of Miami - School of Business Administration - Department of Economics ( email )

P.O. Box 248126
Coral Gables, FL 33124-6550
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
40
Abstract Views
590
PlumX Metrics