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On the Rise of Health Spending and Longevity

  • Raquel Fonseca

    ()

  • Pierre-Carl Michaud

    ()

  • Titus Galama
  • Arie Kapteyn

    ()

The authors 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. They 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. They 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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File URL: http://www.rand.org/content/dam/rand/pubs/working_papers/2010/RAND_WR722.pdf
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Paper provided by RAND Corporation in its series Working Papers with number 722.

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Length: 50 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:ran:wpaper:722
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  2. Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," NBER Chapters, in: Perspectives on the Economics of Aging, pages 415-526 National Bureau of Economic Research, Inc.
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  13. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
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