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Does Ageing Call for a Reform of the Health Care Sector?


  • W. M. T. Westerhout


A popular view is that ageing populations increase health expenditure to GDP ratios because health expenditure correlates positively with age and because the concomitant shrinking of the labour force depresses GDP. The resulting increase in transfers from the young to the old then calls for a reform of health care policies. This article critically examines the arguments underlying this view. It gives credit to factors that counteract the expenditure effect, the effects upon health care market and labour market distortions and the effects upon intergenerational solidarity. Although important, these factors are found to have insufficient weight to invalidate the popular view. (JEL: H21, I10, J10) Copyright 2006, Oxford University Press.

Suggested Citation

  • W. M. T. Westerhout, 2006. "Does Ageing Call for a Reform of the Health Care Sector?," CESifo Economic Studies, CESifo, vol. 52(1), pages 1-31, March.
  • Handle: RePEc:oup:cesifo:v:52:y:2006:i:1:p:1-31

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    Cited by:

    1. Colombier, Carsten & Weber, Werner, 2009. "Projecting health-care expenditure for Switzerland: further evidence against the 'red-herring' hypothesis," MPRA Paper 26747, University Library of Munich, Germany, revised Nov 2009.
    2. Roel van Elk & Esther Mot & P.H. Franses, 2009. "Modelling health care expenditures; overview of the literature and evidence from a panel time series model," CPB Discussion Paper 121, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Vincenzo Atella & Valentina Conti, 2013. "The effect of age and time to death on health care expenditures: the Italian experience," CEIS Research Paper 267, Tor Vergata University, CEIS, revised 12 Nov 2013.
    4. Ed Westerhout & Frank Pellikaan, 2005. "Can we afford to live longer in better health?," CPB Document 85, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Ried, Walter, 2007. "On the relationship between aging, edical progress and age-specific health care expenditures," Wirtschaftswissenschaftliche Diskussionspapiere 08/2007, University of Greifswald, Faculty of Law and Economics.
    6. Casper van Ewijk & Nick Draper & Harry ter Rele & Ed Westerhout, 2006. "Ageing and the sustainability of Dutch public finances," CPB Special Publication 61, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Maciej Lis, 2015. "Red Herring in the Vistula River: Time-to-Death and Health Care Expenditure," IBS Working Papers 13/2015, Instytut Badan Strukturalnych.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General


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