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Public provision of health insurance and welfare

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  • Lim Kyoung Mook

    (Department of Economics, Washington College, Chestertown, MD 21620, USA, Tel.: +1-410-810-5002)

Abstract

This paper examines the effects of expanding public health insurance benefits on individuals’ welfare in a highly old-age dependent economy. On the one hand, such a policy would benefit the older generations in the population by improving their health status. On the other hand, an economy that has a high share of the elderly may sharply increase the tax rate that finances the public health insurance program, which is mainly financed by working-age generations. Due to the trade-off, the impact of the policy on average welfare is ambiguous. To quantify this effect, I examine the South Korean plan to expand its public health insurance despite the country’s rapidly aging population. I build an overlapping-generations model and track the effect of the proposed public health insurance expansion on welfare over a transition path. The results suggest that the proposed expansion not only increases average welfare, but also the welfare of the working-age generations who would be more likely to resort to preventative medicine. However, such welfare gains can be lost if implementation of the policy were to be postponed to a later highly old-age dependent economy.

Suggested Citation

  • Lim Kyoung Mook, 2016. "Public provision of health insurance and welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 439-483, June.
    • Handle: RePEc:bpj:bejmac:v:16:y:2016:i:2:p:439-483:n:8
    DOI: 10.1515/bejm-2015-0094
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    References listed on IDEAS

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    1. Li, Hongbin & Zhang, Jie & Zhang, Junsen, 2007. "Effects of longevity and dependency rates on saving and growth: Evidence from a panel of cross countries," Journal of Development Economics, Elsevier, vol. 84(1), pages 138-154, September.
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    4. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
    5. Hsu, Minchung & Lee, Junsang, 2013. "The Provision Of Public Universal Health Insurance: Impacts On Private Insurance, Asset Holdings, And Welfare," Macroeconomic Dynamics, Cambridge University Press, vol. 17(6), pages 1252-1280, September.
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    Cited by:

    1. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, June.

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    More about this item

    Keywords

    aging population; publicly-provided health insurance; South Korea; transition path;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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