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On The Rise of Health Spending and Longevity

Author

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  • Fonseca, Raquel

    (University of Québec at Montréal)

  • Michaud, Pierre-Carl

    (HEC Montreal)

  • Galama, Titus

    (University of Southern California)

  • Kapteyn, Arie

    (University of Southern California)

Abstract

We use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. We estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a "synergy" or interaction effect which helps explain an additional 37% increase in health spending. We estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10%.

Suggested Citation

  • Fonseca, Raquel & Michaud, Pierre-Carl & Galama, Titus & Kapteyn, Arie, 2009. "On The Rise of Health Spending and Longevity," IZA Discussion Papers 4622, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4622
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    More about this item

    Keywords

    demand for health; health spending; insurance; technological change; longevity;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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