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Technological Advance and the Growth in Health Care Spending

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Abstract

The second half of the twentieth century recorded a rapid growth in health care spending and a significant increase in life expectancy. This paper hypothesizes that the combination of techno-logical progress in medical treatment and rising incomes is the driving force behind these two trends. Using a stochastic, multi-period overlapping-generations model as the analytical vehicle, this paper argues that the rapid growth in medical spending is not driven by factors associated with market structures or insurance opportunities, but instead by factors underlying the production and accumulation of health. According to this model, improvements in medical treatment and rising incomes can explain all of the increase in medical spending and more than 60% of the increase in life expectancy at age 25 during the second half of the twentieth century.

Suggested Citation

  • Richard M. H. Suen, 2005. "Technological Advance and the Growth in Health Care Spending," Economie d'Avant Garde Research Reports 13, Economie d'Avant Garde.
  • Handle: RePEc:eag:rereps:13
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    File URL: http://www.richardsuen.net/files/Tech_HCS.pdf
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    Cited by:

    1. Fonseca, Raquel & Michaud, Pierre-Carl & Kapteyn, Arie & Galama, Titus, 2013. "Accounting for the Rise of Health Spending and Longevity," IZA Discussion Papers 7622, Institute for the Study of Labor (IZA).
    2. Juergen Jung & Chung Tran, 2016. "Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 132-159, April.
    3. Yonghong An & Kai Zhao & Rong Zhou, 2016. "Health spending and public pension: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 987-1004, March.
    4. Juergen Jung & Chung Tran, 2008. "The Macroeconomics of Health Savings Accounts," Caepr Working Papers 2007-023, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    5. Zhigang Feng, 2009. "Macroeconomic Consequences of Alternative Reforms to the Health Insurance System in the U.S," Working Papers 0908, University of Miami, Department of Economics.

    More about this item

    Keywords

    Technological progress; life expectancy; medical spending; health;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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