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Health, health production and input financing: A theoretical note

Author

Listed:
  • Biswajit MANDAL

    (Visva-Bharati University, Santiniketan, India)

  • Saswati CHAUDHURI

    (St. Xavier’s College (Autonomous), Kolkata, India)

  • Arindam MANDAL

    (Siena College, Loudonville, NY, USA)

Abstract

We develop a health production model with input financing in the spirit of standard health capital model. Health production depends not only on tangible inputs required to produce health services, but also depends on institutional set up or governance, and general awareness about health and related issues. In our model, part or all of inputs required to produce health is financed through tax revenues. Using Cobb-Douglas utility and production function, we explore the optimum tax rate under various scenarios of health care financing through tax revenues. The model is further extended to account for increasing returns to scale where input elasticity parameters in health production are not same. We find that increasing returns to scale in health production calls for higher tax rate to finance health productions.

Suggested Citation

  • Biswajit MANDAL & Saswati CHAUDHURI & Arindam MANDAL, 2021. "Health, health production and input financing: A theoretical note," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(626), S), pages 219-230, Spring.
    • Handle: RePEc:agr:journl:v:1(626):y:2021:i:1(626):p:219-230
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    References listed on IDEAS

    as
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    3. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    4. Tavares, Aida Isabel, 2007. "A behavioral note on the demand for health," MPRA Paper 37691, University Library of Munich, Germany.
    5. Wagstaff, Adam, 2002. "Inequalities in health in developing countries - swimming against the tide?," Policy Research Working Paper Series 2795, The World Bank.
    6. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
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