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Health Systems, Inequality and Incentives to Innovate

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  • Rajat Archaryya
  • María del Carmen García-Alonso

    ()

Abstract

Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyze here the optimal income-based price subsidies in a strategic environment. We show that asymmetric health systems can arise even though countries are ex-ante symmetric when international price discrimination is possible. Universal access is less likely to arise without price discrimination but also health policy coordination becomes more important. This is due to the multiple equilibria which make the attainment of universal coverage within a given income range ambiguous. We also show that an increase in intra-country inequality does not always lead to less likely universal coverage when international price discrimination is possible.

Suggested Citation

  • Rajat Archaryya & María del Carmen García-Alonso, 2009. "Health Systems, Inequality and Incentives to Innovate," Studies in Economics 0902, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:0902
    as

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    References listed on IDEAS

    as
    1. Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
    2. Gene M. Grossman & Edwin L.-C. Lai, 2004. "International Protection of Intellectual Property," American Economic Review, American Economic Association, vol. 94(5), pages 1635-1653, December.
    3. Stefan Felder, 2006. "Third-Degree Price Discrimination in the Presence of Subsidies," German Economic Review, Verein für Socialpolitik, vol. 7, pages 419-426, November.
    4. Maskus, Keith E. & Ganslandt, Mattias, 2007. "Intellectual Property Rights, Parallel Imports and Strategic Behavior," Working Paper Series 704, Research Institute of Industrial Economics.
    5. Garber Alan M & Jones Charles I. & Romer Paul, 2006. "Insurance and Incentives for Medical Innovation," Forum for Health Economics & Policy, De Gruyter, vol. 9(2), pages 1-27, March.
    6. Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
    7. Acharyya, Rajat & Garcia-Alonso, Maria D.C., 2006. "Self-interested international income redistribution and access to health care innovation," European Journal of Political Economy, Elsevier, vol. 22(2), pages 322-336, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Health systems; Pharmaceuticals; Innovation; Income based subsidies; Price dicsrimination;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • I1 - Health, Education, and Welfare - - Health

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