Does the U.S. health care sector suffer from Baumol's cost disease? Evidence from the 50 states

Laurie J. Bates and Rexford Santerre ()

Journal of Health Economics, 2013, vol. 32, issue 2, 386-391

Abstract: This study examines if health care costs in the United States are affected by Baumol's cost disease. It relies on an empirical test proposed by Hartwig (2008) and extended by Colombier (2010) and uses a panel data set of 50 states over the 1980–2009 period. The results suggest that health care costs grow more rapidly when economy-wide wage increases exceed productivity gains. The findings are fairly robust with respect to time- and state-fixed effects, individual state time trends, and two-stage least square estimation. Consequently, this study suggests that the U.S. health care sector suffers from Baumol's cost disease.

Keywords: Health care costs; Baumol cost disease; Unbalanced growth; Service sector; Aggregate productivity (search for similar items in EconPapers)
JEL-codes: I10 O40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:32:y:2013:i:2:p:386-391

DOI: 10.1016/j.jhealeco.2012.12.003

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