Four Long-Term Scenarios for the Dutch Government and Health-Care Sector

CPB Document, No. 72, 2004

39 Pages Posted: 26 Jun 2007

See all articles by Frits Bos

Frits Bos

CPB Netherlands Bureau of Economic Policy Analysis

Rudy Douven

CPB Netherlands Bureau for Economic Policy Analysis; CPB Netherlands Bureau for Economic Policy Analysis

Esther Mot

CPB Netherlands Bureau of Economic Policy Analysis

Abstract

Since 2003, a new set of scenario-analyses have been published by the CPB in Four Futures of Europe (de Mooij and Tang, 2003), four scenarios are sketched for the development of the European economy until 2040. The scenarios are defined in terms of two groups of 'key uncertainties'. The first concerns national institutions: to what extent will the mix of public and private responsibilities change? The second key uncertainty concerns international cooperation: to what extent are national states willing and able to cooperate in Europe and at a world wide scale? In the CPB-study Four Futures of the Netherlands: Production, Labour and Sectoral Structure in Four Scenarios until 2040 (Huizinga and Smid, 2004), the European scenarios are elaborated for the Dutch economy. These scenarios differ with respect to demography(population growth, ageing), macro-economic development (productivity, labour market participation, inflation, interest rates, world trade), government policy (e.g. social security system) and specific sector trends. In this paper, the four scenarios are discussed for the development of the sectors government (public administration, defense and subsidised education) and health care (including pharmaceuticals) are discussed. Both sectors are of great economic importance in the Netherlands. In terms of value added they constituteabout one fifth of the Dutch economy; in terms of employment and final consumption even about one quarter is involved. Furthermore, these sectors have in common that they are mainly financed publicly (by social security contributions and taxes) and that productivity growth is relatively slow. Baumol's cost disease model suggests that this can lead to increasing pressure on public finance and to negative effects for economic growth and inflation.

In the two scenarios that stress the importance of collective provisions, (Regional Communities and Strong Europe), the share of government production (public administration, defense and subsidised education) will increase from 10.5% of GDP in 2001 to about 12% in 2040. In the other two scenarios, (Transatlantic Market and Global Economy), the government sector will decrease in size to 8% of GDP in 2040.

Keywords: Long-run, scenario-analysis, government, health care, productivity, ageing, Baumol's costs disease model

JEL Classification: H51, H52, I00, O2

Suggested Citation

Bos, Frits and Douven, Rudy and Mot, Esther, Four Long-Term Scenarios for the Dutch Government and Health-Care Sector. CPB Document, No. 72, 2004, Available at SSRN: https://ssrn.com/abstract=996550

Frits Bos (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Rudy Douven

CPB Netherlands Bureau for Economic Policy Analysis ( email )

P.O. Box 80510
The Hague, 2508 GM
Netherlands

HOME PAGE: http://www.cpb.nl/nl/org/homepages/rcmhd/

CPB Netherlands Bureau for Economic Policy Analysis ( email )

P.O. Box 80510
The Hague, 2508 GM
Netherlands

HOME PAGE: http://www.cpb.nl/nl/org/homepages/rcmhd/

Esther Mot

CPB Netherlands Bureau of Economic Policy Analysis ( email )

2585 JR

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