The Productivity of Pharmaceuticals in Improving Health: An Analysis of the OECD Health Data
AbstractAlthough a number of studies have been conducted on health production functions, little attention has been given to pharmaceuticals as a separate input into the production of health. Building upon existing published work, this paper uses an alternative specification and more recent data to estimate the effect of pharmaceutical expenditures on levels of health in the member countries of the Organization for Economic Cooperation and Development (OECD). In a sample of developed countries, we found that pharmaceutical consumption, as measured by per capita drug expenditures, has a positive effect on life expectancy at advanced ages. The marginal effect of pharmaceutical consumption is consistent with estimates that have been reported previously but appears to decline with increasing age. Over the past few years, the substantial and disproportionate growth of pharmaceutical expenditures for public and private payers in the U.S. has led to calls for regulatory intervention (e.g., price controls). However, our research suggests that increases in drug spending may yield further increases in life expectancy.
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Bibliographic InfoPaper provided by EconWPA in its series HEW with number 0206001.
Length: 42 pages
Date of creation: 19 Jun 2002
Date of revision: 11 May 2003
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 42; figures: included. The effects of pharmaceuticals on health
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Health production; life expectancy; pharmaceuticals; OECD; ecological studies;
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-31 (All new papers)
- NEP-EFF-2002-10-27 (Efficiency & Productivity)
- NEP-HEA-2002-07-31 (Health Economics)
- NEP-MIC-2002-07-31 (Microeconomics)
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