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Social Security and the Rise in Health Spending

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  • Kai Zhao

    (University of Connecticut)

Abstract

In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.

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File URL: http://web2.uconn.edu/economics/working/2014-04.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2014-04.

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Length: 43 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:uct:uconnp:2014-04

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Keywords: Social Security; Health Spending; Saving; Longevity;

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References

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Cited by:
  1. Bagchi, Shantanu, 2013. "Is the Social Security Crisis Really as Bad as We Think?," MPRA Paper 56294, University Library of Munich, Germany, revised May 2014.

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