Accounting for the Rise of Health Spending and Longevity

Raquel Fonseca (), Pierre-Carl Michaud, Arie Kapteyn and Titus Galama

No 7622, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36% of the rise in health spending (technology 30% and insurance 6%), while income explains only 4% and other health trends 0.5%. By simultaneously occurring over this period, these changes may have led to complementarity effects which we find to explain an additional 57% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health care productivity at an annual rate of 1.3%, explains almost all of the rise in life expectancy at age 25 over this period, while changes in insurance and income together explain less than 10%. Welfare gains are substantial and most of the gain appears to be due to technological change.

Keywords: life-cycle models; longevity; health spending; technological change (search for similar items in EconPapers)
JEL-codes: I10 I38 J26 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2013-09
New Economics Papers: this item is included in nep-age, nep-dem and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published - published in: Journal of the European Economic Association, 2021, 19 (1), 536–579

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Related works:
Journal Article: Accounting for the Rise of Health Spending and Longevity (2021)
Working Paper: Accounting for the Rise of Health Spending and Longevity (2018)
Working Paper: Accounting for the Rise of Health Spending and Longevity (2013)
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