Public Healthcare Spending, Business Dynamism, and Wage Inequality: Evidence from Developed and Developing Economies

Chi‐Chur Chao, Cong Tam Trinh and Xuan Nguyen

Review of Income and Wealth, 2025, vol. 71, issue 1

Abstract: This paper examines the effects of public healthcare spending on wage inequality and social welfare in an economy with rural and urban regions. The objectives are twofold. First, we introduce a simple theoretical framework that captures the link between public healthcare spending and firms' output choice and subsequent wage provisions. We demonstrate that in the short run, a rise in public healthcare services can increase urban output and lower urban unemployment and raise both skilled and unskilled wage rates. In the long run, firm entry produces a business‐dynamism effect that enhances the rate of return on capital, reduces the unskilled wage rate and intensifies wage inequality. Second, we empirically test our theoretical predictions using data from 112 economies in the period 2006–2018. We find evidence supporting our theoretical findings concerning the effects of public healthcare on wage outcomes, especially in the long run. Results are highly consistent across the two groups: advanced economies (mainly OECD/European economies), and emerging and developing economies based on alternative measures for wage inequality, including the GINI coefficient and top income share. The paper provides useful information for the public healthcare policy.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/roiw.12712

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:revinw:v:71:y:2025:i:1:n:e12712

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0034-6586

Access Statistics for this article

Review of Income and Wealth is currently edited by Conchita D'Ambrosio and Robert J. Hill

More articles in Review of Income and Wealth from International Association for Research in Income and Wealth Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().