Macroeconomic Effects of Healthcare Financing in Colombia

Óscar Ávila-Montealegre (), Juan J. Ospina-Tejeiromario () and Mario A. Ramos-Veloza ()
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Óscar Ávila-Montealegre: Banco de la República
Juan J. Ospina-Tejeiromario: Banco de la República
Mario A. Ramos-Veloza: Banco de la República

Hacienda Pública Española / Review of Public Economics, 2025, vol. 254, issue 3, 59-85

Abstract: Real healthcare expenditure in Colombia is projected to rise 49% over the next eight years due to population aging, rising costs, and domestic policies, adding significant pressure to public finances. Using a dynamic general equilibrium model with heterogeneous households, we analyze the macroeconomic impact of financing higher healthcare expenditure through different taxes in a context of high informality. While consumption taxes are the best option in terms of output, financing with taxes on high-skilled labor improves income distribution with similar effects on production. Population aging adds pressure on aggregate dynamics by reducing labor supply, savings, and capital accumulation.

Keywords: General equilibrium; Heterogeneous agents; Taxes; Government expenditure (search for similar items in EconPapers)
JEL-codes: E10 E26 E62 F41 (search for similar items in EconPapers)
Date: 2025
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