IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Income and Health Spending: Evidence from Oil Price Shocks

  • Daron Acemoglu

    (MIT and NBER)

  • Amy Finkelstein

    (MIT and NBER)

  • Matthew J. Notowidigdo

    (University of Chicago, Booth School of Business, and NBER)

Health expenditures as a share of GDP in the United States have more than tripled over the past half-century. A common conjecture is that this is a consequence of rising income. We investigate this hypothesis by instrumenting for local area income with time series variation in oil prices interacted with local oil reserves. This strategy enables us to capture both partial equilibrium and local general equilibrium effects of income on health expenditures. Our central income elasticity estimate is 0.7, with 1.1 as the upper end of the 95% confidence interval, which suggests that rising income is unlikely to be a major driver of the rising health expenditure share of GDP. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

If 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.

File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00306
File Function: link to full text PDF
Download Restriction: no

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 95 (2013)
Issue (Month): 4 (October)
Pages: 1079-1095

as
in new window

Handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1079-1095
Contact details of provider: Web page: http://mitpress.mit.edu/journals/

Order Information: Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

References listed on IDEAS
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.:

as in new window
  1. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
  2. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  4. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
  5. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
  7. Oecd, 2006. "Projecting OECD Health and Long-Term Care Expenditures: What Are the Main Drivers?," OECD Economics Department Working Papers 477, OECD Publishing.
  8. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  9. Cutler, David, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform," Scholarly Articles 2640584, Harvard University Department of Economics.
  10. Kline, Patrick, 2008. "Understanding Sectoral Labor Market Dynamics: An Equilibrium Analysis of the Oil and Gas Field Services Industry," Working Papers 43, Yale University, Department of Economics.
  11. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 527-564, May.
  12. Baker, Laurence C., 2001. "Managed care and technology adoption in health care: evidence from magnetic resonance imaging," Journal of Health Economics, Elsevier, vol. 20(3), pages 395-421, May.
  13. Blomqvist, A. G. & Carter, R. A. L., 1997. "Is health care really a luxury?," Journal of Health Economics, Elsevier, vol. 16(2), pages 207-229, April.
  14. Guy Michaels, 2007. "The long term consequences of resource based specialization," LSE Research Online Documents on Economics 3249, London School of Economics and Political Science, LSE Library.
  15. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  16. Whitney K. Newey & James L. Powell & Francis Vella, 1999. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Econometrica, Econometric Society, vol. 67(3), pages 565-604, May.
  17. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," Levine's Working Paper Archive 228400000000000002, David K. Levine.
  18. Joseph P. Newhouse & Charles E. Phelps, 1976. "New Estimates of Price and Income Elasticities of Medical Care Services," NBER Chapters, in: The Role of Health Insurance in the Health Services Sector, pages 261-320 National Bureau of Economic Research, Inc.
  19. Steven J. Davis & John Haltiwanger, 1999. "Sectoral Job Creation and Destruction Responses to Oil Price Changes," NBER Working Papers 7095, National Bureau of Economic Research, Inc.
  20. David M. Cutler & Louise Sheiner, 1997. "Managed Care and the Growth of Medical Expenditures," NBER Working Papers 6140, National Bureau of Economic Research, Inc.
  21. Robert W. Fogel, 1999. "Catching Up with the Economy," American Economic Review, American Economic Association, vol. 89(1), pages 1-21, March.
  22. Kilian, Lutz, 2007. "The Economic Effects of Energy Price Shocks," CEPR Discussion Papers 6559, C.E.P.R. Discussion Papers.
  23. Fuchs, Victor R, 1996. "Economics, Values, and Health Care Reform," American Economic Review, American Economic Association, vol. 86(1), pages 1-24, March.
  24. Amy Finkelstein, 2005. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," NBER Working Papers 11619, National Bureau of Economic Research, Inc.
  25. Kevin M. Murphy & Robert H. Topel, 2005. "The Value of Health and Longevity," NBER Working Papers 11405, National Bureau of Economic Research, Inc.
  26. Laurence C. Baker & Ciaran S. Phibbs, 2002. "Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 524-548, Autumn.
  27. Dan Black & Terra McKinnish & Seth Sanders, 2005. "The Economic Impact Of The Coal Boom And Bust," Economic Journal, Royal Economic Society, vol. 115(503), pages 449-476, 04.
  28. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
  29. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
  30. Cutler David M. & Sheiner Louise, 1998. "Managed Care and the Growth of Medical Expenditures," Forum for Health Economics & Policy, De Gruyter, vol. 1(1), pages 1-41, January.
  31. repec:cup:cbooks:9780521898010 is not listed on IDEAS
  32. repec:cup:cbooks:9780521725200 is not listed on IDEAS
  33. 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.
  34. David M. Cutler, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 881-906, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1079-1095. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Pollock-Nelson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.