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The dynamics of health care and growth: A model with physician in dual practice

Baris Alpaslan, King Yoong Lim () and Yan Song

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We present a growth model with micro-foundations of a mixed health care system and physician dual-practice, to analyze for welfare-optimal government financing strategy for a mixed health system in developing countries. Calibrating the model for Indonesia, we find that a government subsidy to private health care is both growth- and welfare-enhancing, whereas it is more effective for the government to invest in health infrastructure instead of a public-sector “rewarding” policy in raising government physicians’ wage if its goal is to improve physician effort in public practice. Indeed, for the “rewarding” policy, a dynamic trade-off in growth is found, which is not previously documented in the literature. We also find the model to produce two regimes with different welfare-optimal health financing (a “normal” regime and a low public-sector congestion regime). In the former, welfare-optimal health financing strategy appears to be promoting private health subsidy at the expense of public-sector physician wages. In the latter, the opposite is welfare-optimal.

Keywords: Dual Practice; Economic Growth; Health Care Financing; Welfare (search for similar items in EconPapers)
JEL-codes: H51 I11 I15 O41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-01
New Economics Papers: this item is included in nep-gro, nep-hea, nep-pbe and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2019-05

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