IDEAS home Printed from
   My bibliography  Save this paper

The Productivity of Pharmaceuticals in Improving Health: An Analysis of the OECD Health Data


  • James W. Shaw

    (University of Arizona)

  • William C. Horrace

    (Syracuse University)

  • Ronald J. Vogel

    (University of Arizona)


Although a number of studies have been conducted on health production functions, little attention has been given to pharmaceuticals as a separate input into the production of health. Building upon existing published work, this paper uses an alternative specification and more recent data to estimate the effect of pharmaceutical expenditures on levels of health in the member countries of the Organization for Economic Cooperation and Development (OECD). In a sample of developed countries, we found that pharmaceutical consumption, as measured by per capita drug expenditures, has a positive effect on life expectancy at advanced ages. The marginal effect of pharmaceutical consumption is consistent with estimates that have been reported previously but appears to decline with increasing age. Over the past few years, the substantial and disproportionate growth of pharmaceutical expenditures for public and private payers in the U.S. has led to calls for regulatory intervention (e.g., price controls). However, our research suggests that increases in drug spending may yield further increases in life expectancy.

Suggested Citation

  • James W. Shaw & William C. Horrace & Ronald J. Vogel, 2002. "The Productivity of Pharmaceuticals in Improving Health: An Analysis of the OECD Health Data," HEW 0206001, University Library of Munich, Germany, revised 11 May 2003.
  • Handle: RePEc:wpa:wuwphe:0206001
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 42; figures: included. The effects of pharmaceuticals on health

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Wolfe, Barbara & Gabay, Mary, 1987. "Health status and medical expenditures: More evidence of a link," Social Science & Medicine, Elsevier, vol. 25(8), pages 883-888, January.
    2. Frech, H. E. III & Miller, Richard D. Jr., 1996. "The Productivity of Health Care and Pharmaceuticals: An International Comparison," University of California at Los Angeles, Research Program in Pharmaceutical Economics and Policy qt0d90459k, Research Program in Pharmaceutical Economics and Policy, UCLA.
    3. Szuba, Tadeusz J., 1986. "International comparison of drug consumption: Impact of prices," Social Science & Medicine, Elsevier, vol. 22(10), pages 1019-1025, January.
    4. Charles T. Stewart Jr., 1971. "Allocation of Resources to Health," Journal of Human Resources, University of Wisconsin Press, vol. 6(1), pages 103-122.
    5. Frank R. Lichtenberg, 1996. "The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality," NBER Working Papers 5418, National Bureau of Economic Research, Inc.
    6. Frank R. Lichtenberg, 1998. "Pharmaceutical Innovation, Mortality Reduction, and Economic Growth," NBER Working Papers 6569, National Bureau of Economic Research, Inc.
    7. Wolfe, Barbara L., 1986. "Health status and medical expenditures: Is there a link?," Social Science & Medicine, Elsevier, vol. 22(10), pages 993-999, January.
    8. Sudhir Anand & Martin Ravallion, 1993. "Human Development in Poor Countries: On the Role of Private Incomes and Public Services," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 133-150, Winter.
    9. Bidani, Benu & Ravallion, Martin, 1997. "Decomposing social indicators using distributional data," Journal of Econometrics, Elsevier, vol. 77(1), pages 125-139, March.
    10. Andrew H. Briggs & David E. Wonderling & Christopher Z. Mooney, 1997. "Pulling cost‐effectiveness analysis up by its bootstraps: A non‐parametric approach to confidence interval estimation," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 327-340, July.
    11. Wnuk-Lipinski, Edmund & Illsey, Raymond, 1990. "International comparative analysis: Main findings and conclusions," Social Science & Medicine, Elsevier, vol. 31(8), pages 879-889, January.
    12. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Health production; life expectancy; pharmaceuticals; OECD; ecological studies;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:wpa:wuwphe:0206001. 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: (EconWPA). General contact details of provider: .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.