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On the codetermination of tax-financed medical R&D and healthcare expenditures: Models and evidence

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  • Batinti, Alberto
  • Congleton, Roger D.

Abstract

This paper develops a model of voter choices regarding tax-financed healthcare R&D and healthcare, and provides statistical evidence that is consistent with the theoretical analysis. Healthcare expenditures and the level of healthcare technology are not entirely independent phenomena, as often assumed in theoretical and empirical work. Voter interests imply that electoral support for subsidizing healthcare R&D is likely to exist in both private and public healthcare systems. These subsidies in turn tend to increase the rate of innovation and thereby long-run demand for and cost of healthcare through effects on the effectiveness and menu of available healthcare treatments.

Suggested Citation

  • Batinti, Alberto & Congleton, Roger D., 2018. "On the codetermination of tax-financed medical R&D and healthcare expenditures: Models and evidence," European Journal of Political Economy, Elsevier, vol. 54(C), pages 175-188.
    • Handle: RePEc:eee:poleco:v:54:y:2018:i:c:p:175-188
    DOI: 10.1016/j.ejpoleco.2018.03.006
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    References listed on IDEAS

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    1. Roger D. Congleton & Alberto Batinti & Rinaldo Pietratonio, 2017. "The Electoral Politics and the Evolution of Complex Healthcare Systems," Kyklos, Wiley Blackwell, vol. 70(4), pages 483-510, November.
    2. Okunade, Albert A. & Murthy, Vasudeva N. R., 2002. "Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture," Journal of Health Economics, Elsevier, vol. 21(1), pages 147-159, January.
    3. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    4. 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 223-255, March-Apr.
    5. Russell Thomson, 2017. "The Effectiveness of R&D Tax Credits," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 544-549, July.
    6. Roger Congleton, 2007. "Informational limits to democratic public policy: The jury theorem, yardstick competition, and ignorance," Public Choice, Springer, vol. 132(3), pages 333-352, September.
    7. 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.
    8. MORENO-TERNERO, Juan D. & ROEMER, John E., 2007. "The political economy of health care finance," LIDAM Discussion Papers CORE 2007031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Bethencourt, Carlos & Galasso, Vincenzo, 2008. "Political complements in the welfare state: Health care and social security," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 609-632, April.
    10. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-552, June.
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    Citations

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    Cited by:

    1. Pijus Krūminas, 2019. "Public R&D under different electoral rules: evidence from OECD countries," Constitutional Political Economy, Springer, vol. 30(3), pages 300-329, September.
    2. Filippetti, Andrea & Vezzani, Antonio, 2022. "The political economy of public research, or why some governments commit to research more than others," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    3. Roger D. Congleton & Youngshin Kim & Alexander Marsella, 2020. "On the stability of U.S. politics: post-sample forecasts and refinements of the Congleton–Shughart models of Social Security and Medicare benefit levels," Public Choice, Springer, vol. 183(1), pages 101-132, April.
    4. Roger D. Congleton, 2019. "Fiscal Bargaining and the Implicit Fiscal Constitutions of Liberal Democracies: A Public Choice Perspective," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 15(2), pages 175-198, December.
    5. Roger D. Congleton, 2023. "Federalism and pandemic policies: variety as the spice of life," Public Choice, Springer, vol. 195(1), pages 73-100, April.

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    More about this item

    Keywords

    Welfare state; Public healthcare systems; R&D; Medical insurance; Median voter; Innovations in healthcare;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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