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Why does Health Share of Income Increase over Time?

Author

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  • Rodrigo Cerda

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

This paper deals with the view that income elasticity of health care is larger than one, as argued by empirical results on the literature. We build a theoretical model that shows that endogenous demographic transition may play a fundamental role on this result. It is argued that families must choose the number and the life expectancy of their members. Due to limited resources, there is a trade-o. between those two variables though. It is shown that increases on income may produce a demographic transition that allows a larger allocation of resources to health care.

Suggested Citation

  • Rodrigo Cerda, 2002. "Why does Health Share of Income Increase over Time?," Documentos de Trabajo 207, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:207
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    File URL: http://www.economia.uc.cl/docs/dt_207.pdf
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    References listed on IDEAS

    as
    1. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    2. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
    3. Gerdtham, Ulf-G. & Jonsson, Bengt, 1991. "Conversion factor instability in international comparisons of health care expenditure," Journal of Health Economics, Elsevier, vol. 10(2), pages 227-234, July.
    4. Imrohoruglu, Ayse, 1989. "Cost of Business Cycles with Indivisibilities and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1364-1383, December.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Health share of income; life expectancy; demographic transition;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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