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Why Have Health Expenditures as a Share fo GDP Risen So Much?

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  • Charles I. Jones

Abstract

Aggregate health expenditures as a share of GDP have risen in the United States from about 5 percent in 1960 to nearly 14 percent in recent years. Why? This paper explores a simple explanation based on technological progress. Medical advances allow diseases to be cured today, at a cost, that could not be cured at any price in the past. When this technological progress is combined with a Medicare- like transfer program to pay the health expenses of the elderly, the model is able to reproduce the basic facts of recent U.S. experience, including the large increase in the health expenditure share, a rise in life expectancy, and an increase in the size of health-related transfer payments as a share of GDP.

Suggested Citation

  • Charles I. Jones, 2002. "Why Have Health Expenditures as a Share fo GDP Risen So Much?," NBER Working Papers 9325, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9325
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    References listed on IDEAS

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    2. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    3. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-552, June.
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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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