Accounting for the Rise of Health Spending and Longevity
AbstractWe estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36% of the rise in health spending (technology 30% and insurance 6%), while income explains only 4% and other health trends 0.5%. By simultaneously occurring over this period, these changes may have led to complementarity effects which we find to explain an additional 57% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health care productivity at an annual rate of 1.3%, explains almost all of the rise in life expectancy at age 25 over this period while changes in insurance and income together explain less than 10%. Welfare gains are substantial and most of the gain appears to be due to technological change.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 1326.
Date of creation: 2013
Date of revision:
Demand for health; life cycle; health spending; technology; insurance; longevity;
Other versions of this item:
- Fonseca, Raquel & Michaud, Pierre-Carl & Kapteyn, Arie & Galama, Titus, 2013. "Accounting for the Rise of Health Spending and Longevity," IZA Discussion Papers 7622, Institute for the Study of Labor (IZA).
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- I1 - Health, Education, and Welfare - - Health
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-09-26 (Economics of Ageing)
- NEP-ALL-2013-09-26 (All new papers)
- NEP-DEM-2013-09-26 (Demographic Economics)
- NEP-HEA-2013-09-26 (Health Economics)
- NEP-IAS-2013-09-26 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, vol. 98(5), pages 2242-58, December.
- Mariacristina De Nardi & Eric French & John B. Jones, 2010.
"Why Do the Elderly Save? The Role of Medical Expenses,"
Journal of Political Economy,
University of Chicago Press, vol. 118(1), pages 39-75, 02.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the Elderly Save? The Role of Medical Expenses," NBER Working Papers 15149, National Bureau of Economic Research, Inc.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the elderly save? the role of medical expenses," Working Paper Series WP-09-02, Federal Reserve Bank of Chicago.
- Khwaja, Ahmed, 2010. "Estimating willingness to pay for medicare using a dynamic life-cycle model of demand for health insurance," Journal of Econometrics, Elsevier, vol. 156(1), pages 130-147, May.
- James P. Smith, 2007. "The Impact of Socioeconomic Status on Health over the Life-Course," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
- Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
- Joseph E. Aldy & W. Kip Viscusi, 2004. "Age Variations in Workers' Value of Statistical Life," NBER Working Papers 10199, National Bureau of Economic Research, Inc.
- Motohiro Yogo, 2009.
"Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing and Risky Assets,"
Working Papers, Center for Retirement Research at Boston College
wp2009-3, Center for Retirement Research, revised Jan 2009.
- Motohiro Yogo, 2008. "Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets," 2008 Meeting Papers 63, Society for Economic Dynamics.
- Motohiro Yogo, 2009. "Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets," NBER Working Papers 15307, National Bureau of Economic Research, Inc.
- Kevin M. Murphy & Robert H. Topel, 2006.
"The Value of Health and Longevity,"
Journal of Political Economy,
University of Chicago Press, vol. 114(5), pages 871-904, October.
- Timothy J. Halliday & Hui He & Hao Zhang, 2009.
"Health Investment over the Life-Cycle,"
200910, University of Hawaii at Manoa, Department of Economics.
- Timothy Halliday & Hui He & Hao Zhang, 2012. "Health Investment over the Life-Cycle," Working Papers 201210, University of Hawaii at Manoa, Department of Economics.
- Halliday, Timothy J. & He, Hui & Zhang, Hao, 2009. "Health Investment over the Life-Cycle," IZA Discussion Papers 4482, Institute for the Study of Labor (IZA).
- Hui He & Hao Zhang & Tim Halliday, 2010. "Health Investment over the Life-Cycle," 2010 Meeting Papers 1179, Society for Economic Dynamics.
- Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
- Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004.
"Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status,"
in: Perspectives on the Economics of Aging, pages 415-526
National Bureau of Economic Research, Inc.
- Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January.
- Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
- Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
- Richard M. H. Suen, 2005. "Technological Advance and the Growth in Health Care Spending," Economie d'Avant Garde Research Reports 13, Economie d'Avant Garde.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Johanne Perron).
If references are entirely missing, you can add them using this form.