Social security and the rise in health spending

Kai Zhao

Journal of Monetary Economics, 2014, vol. 64, issue C, 21-37

Abstract: In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.

Keywords: Social security; Health spending; Saving; Longevity (search for similar items in EconPapers)
JEL-codes: E20 E60 H30 I00 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:64:y:2014:i:c:p:21-37

DOI: 10.1016/j.jmoneco.2014.02.005

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