Rising health spending, new medical technology and the Baumol effect
This paper estimates the Baumol effect in health spending, using a panel data set of OECD countries. Health expenditure as a share of GDP rises in most OECD countries. One of the possible causes is the so-called Baumol effect, which may arise if labour productivity in health care grows more slowly than in the overall economy. If in addition demand for health care is inelastic, then the share of health spending in GDP will rise over time. We do indeed find that one percentage growth in economy-wide labour productivity is associated with about 0.5 percent growth in real health spending. This implies that economy-wide productivity growth leads to higher real health spending.
|Date of creation:||Dec 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Web page: http://www.cpb.nl/
More information through EDIRC
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.:
- Jack E. Triplett & Barry P. Bosworth, 2003. "Productivity measurement issues in services industries: "Baumol's disease" has been cured," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 23-33.
- 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.
- Nordhaus William D, 2008.
"Baumol's Diseases: A Macroeconomic Perspective,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 8(1), pages 1-39, February.
- Menkveld, Albert J. & Koopman, Siem Jan & Lucas, Andre, 2007. "Modeling Around-the-Clock Price Discovery for Cross-Listed Stocks Using State Space Methods," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 213-225, April.
- Frank R. Lichtenberg, 2007. "The Impact of New Drugs on US Longevity and Medical Expenditure, 1990–2003: Evidence from Longitudinal, Disease-Level Data," American Economic Review, American Economic Association, vol. 97(2), pages 438-443, May.
When requesting a correction, please mention this item's handle: RePEc:cpb:discus:115. 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: ()
If references are entirely missing, you can add them using this form.