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Why Have Health Expenditures as a Share fo GDP Risen So Much?

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  • Charles I. Jones

Abstract

Aggregate health expenditures as a share of GDP have risen in the United States from about 5 percent in 1960 to nearly 14 percent in recent years. Why? This paper explores a simple explanation based on technological progress. Medical advances allow diseases to be cured today, at a cost, that could not be cured at any price in the past. When this technological progress is combined with a Medicare- like transfer program to pay the health expenses of the elderly, the model is able to reproduce the basic facts of recent U.S. experience, including the large increase in the health expenditure share, a rise in life expectancy, and an increase in the size of health-related transfer payments as a share of GDP.

Suggested Citation

  • Charles I. Jones, 2002. "Why Have Health Expenditures as a Share fo GDP Risen So Much?," NBER Working Papers 9325, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9325 Note: EFG HC HE
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    References listed on IDEAS

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    1. Irving Shapiro & Matthew D. Shapiro & David Wilcox, 2001. "Measuring the value of Cataract Surgery," NBER Chapters,in: Medical Care Output and Productivity, pages 411-438 National Bureau of Economic Research, Inc.
    2. 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.
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    Citations

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    Cited by:

    1. Gilad Sorek, 2006. "Advancing Medical Technology, Aging Population, and Economic Growth," DEGIT Conference Papers c011_046, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Follette, Glenn & Sheiner, Louise, 2005. "The Sustainability of Health Spending Growth," National Tax Journal, National Tax Association, vol. 58(3), pages 391-408, September.
    3. Yihua Yu & Li Zhang & Fanghua Li & Xinye Zheng, 2013. "Strategic interaction and the determinants of public health expenditures in China: a spatial panel perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 203-221, February.
    4. Agnieszka Strzelecka & Sylwia Nieszporska, 2015. "Expenditures Of The National Health Fund On Hospital Services And The Efficiency Of Hospitals In Polish Voivodeships," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 9(1), pages 465-477.
    5. Julie Topoleski, 2004. "Uncertainty About Projections of Medicare Cost Growth: Technical Paper 2004-13," Working Papers 15942, Congressional Budget Office.
    6. Badi Baltagi & Francesco Moscone & Elisa Tosetti, 2012. "Medical technology and the production of health care," Empirical Economics, Springer, vol. 42(2), pages 395-411, April.
    7. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 39-72.
    8. Torben Andersen, 2007. "The Scandinavian Model – Prospects and Challenges," CESifo Working Paper Series 1903, CESifo Group Munich.
    9. Frederick van der Ploeg, 2007. "Sustainable Social Spending and Stagnant Public Services: Baumol's Cost Disease Revisited," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 519-547, December.
    10. Frits Bos & Rudy Douven & Esther Mot, 2004. "Four scenarios for the future of the public sector and healthcare," CPB Document 72, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Wong, Albert & Wouterse, Bram & Slobbe, Laurentius C.J. & Boshuizen, Hendriek C. & Polder, Johan J., 2012. "Medical innovation and age-specific trends in health care utilization: Findings and implications," Social Science & Medicine, Elsevier, vol. 74(2), pages 263-272.
    12. Ed Westerhout & Frank Pellikaan, 2005. "Can we afford to live longer in better health?," CPB Document 85, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Stolpe, Michael, 2003. "Ressourcen und Ergebnisse der globalen Gesundheitsökonomie: Einführung und Überblick," Kiel Working Papers 1177, Kiel Institute for the World Economy (IfW).
    14. Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document 147, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Li Gan & Guan Gong, 2004. "Mortality Risk and Educational Attainment of Black and White Men," NBER Working Papers 10381, National Bureau of Economic Research, Inc.
    16. Laura Obreja Braşoveanu, 2012. "Correlation Between Government and Economic Growth - Specific Features for 10 Nms," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 2(5), pages 1-14, October.
    17. Charles I. Jones, 2001. "The economic return to health expenditures," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec14.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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