Health capital accumulation, health insurance, and aggregate outcomes: A neoclassical approach

Mark Kelly

Journal of Macroeconomics, 2017, vol. 52, issue C, 1-22

Abstract: Over the past two decades, medical expenditure growth in the US has outpaced GDP growth by over 1.3% annually. To date, the literature has primarily focused on explaining the rapid rise in medical consumption relative to output, with only limited attention given to understanding the long-run macroeconomic implications of this trend. In this study, I modify the standard Neoclassical growth framework to include health capital accumulation, public and private health insurance, and GHH utility. After calibrating the model to match US data for the period 1996–2013, I systematically investigate the response of output, physical and health capital, medical and non-medical consumption, and household time allocation to one-time exogenous shocks to various potential determinants of medical expenditure growth. I find that a 10% increase in final goods and medical sector productivity shocks each have a positive effect on aggregate welfare. On the other hand, a 10% increase to the endogenous depreciation rate of health capital, or to either the public or the private health insurance share are all found to be welfare reducing.

Keywords: General equilibrium; Neoclassical; Time use; Health capital accumulation; Health insurance; Healthcare consumption (search for similar items in EconPapers)
JEL-codes: E13 E20 E62 I12 I13 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:52:y:2017:i:c:p:1-22

DOI: 10.1016/j.jmacro.2017.02.003

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