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Unbalanced growth and health care expenditure

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  • Chun-Yu Ho
  • Xin Li
  • Weimin Zhou

Abstract

type="main" xml:id="ecot12051-abs-0001"> Baumol's model of unbalanced growth implies that health care expenditure (HCE) is driven by wage increases in excess of productivity growth. However, it remains unclear whether the HCE in developing countries is affected by the same factor. This paper tests this hypothesis by using China provincial panel data. We show that HCE grows more rapidly if economy-wide wage growth exceeds productivity growth in China. The results are robust to the use of housing price as an instrumental variable for the economy-wide nominal wage and the inclusion of real GDP growth, demographic structure, government deficit, pollution emissions and health sector quality as control variables. Furthermore, our findings show that Baumol's cost disease plays a more important role in the less economically developed western regions in which the rural–urban migration is less pronounced.

Suggested Citation

  • Chun-Yu Ho & Xin Li & Weimin Zhou, 2014. "Unbalanced growth and health care expenditure," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(4), pages 739-758, October.
    • Handle: RePEc:bla:etrans:v:22:y:2014:i:4:p:739-758
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    File URL: http://hdl.handle.net/10.1111/ecot.2014.22.issue-4
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    Cited by:

    1. Ray Boshara & William R. Emmons & Bryan J. Noeth, 2015. "The Demographics of Wealth - How Age, Education and Race Separate Thrivers from Strugglers in Today's Economy. Essay No. 1: Race, Ethnicity and Wealth," Demographics of Wealth, Federal Reserve Bank of St. Louis, issue 1, pages 1-24.
    2. McGrath, Simon & Powell, Lesley, 2016. "Skills for sustainable development: Transforming vocational education and training beyond 2015," International Journal of Educational Development, Elsevier, vol. 50(C), pages 12-19.
    3. Lauren Hersch Nicholas & Johanna Catherine Maclean, 2019. "The Effect of Medical Marijuana Laws on the Health and Labor Supply of Older Adults: Evidence from the Health and Retirement Study," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 38(2), pages 455-480, March.
    4. Bonham, Jennifer & Johnson, Marilyn & Haworth, Narelle, 2018. "Cycling related content in the driver licensing process," Transportation Research Part A: Policy and Practice, Elsevier, vol. 117(C), pages 117-126.
    5. Hersch Nicholas, Lauren & Maclean, J. Catherine, 2017. "The Effect of Medical Marijuana Laws on the Labor Supply of Older Adults: Evidence from the Health and Retirement Study," IZA Discussion Papers 10489, Institute of Labor Economics (IZA).
    6. Carmichael, Fiona & Ercolani, Marco G., 2015. "Age-training gaps across the European Union: How and why they vary across member states," The Journal of the Economics of Ageing, Elsevier, vol. 6(C), pages 163-175.

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