IDEAS home Printed from https://ideas.repec.org/p/red/sed011/1111.html
   My bibliography  Save this paper

On the Optimal Distribution of Health Care Spending

Author

Listed:
  • Roozbeh Hosseini

    (Arizona State University)

  • Larry E. Jones

    (University of Minnesota)

  • Laurence Ales

    (Carnegie Mellon University)

Abstract

How should society allocate health-care resources across individuals? In what ways is the current allocation of health-care inefficient? In this paper we study a model in which health status affects probability of survival and individuals are heterogeneous with respect to their labor productivity. We characterize the ex-ante efficient allocation with full information in this environment and show that heterogeneity in labor productivity introduces heterogeneity in level of health-care investment across individuals. More productive individuals should be healthier in order to survive longer and continue to contribute to output. This is socially optimal even if it is followed by complete redistribution of consumption resources. We compare the optimal allocation with what is observed in Medical Expenditure Panel Survey (MEPS). Although it is efficient to induce inequality in health-care expenditure, we find that the amount of health care inequality observed in the data is orders of magnitudes larger than what is implied by ex ante efficiency in our benchmark environment.

Suggested Citation

  • Roozbeh Hosseini & Larry E. Jones & Laurence Ales, 2011. "On the Optimal Distribution of Health Care Spending," 2011 Meeting Papers 1111, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1111
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2011/paper_1111.pdf
    Download Restriction: no

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed011:1111. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.