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On The Rise of Health Spending and Longevity

  • Fonseca, Raquel


    (University of Québec at Montréal)

  • Michaud, Pierre-Carl


    (HEC Montreal)

  • Galama, Titus


    (University of Southern California)

  • Kapteyn, Arie


    (University of Southern California)

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%.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4622.

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Length: 51 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4622
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