Public-private Mix of Health Expenditure: A Political Economy and Quantitative Analysis
Canadian Journal of Economics 49(2) 2016, pp. 834-866
31 Pages Posted: 23 Feb 2021
Date Written: December 15, 2016
This paper constructs a simple model to examine decisions on public and private health spending under majority voting. In the model, agents with heterogeneous incomes choose how much to consume and spend on health care and vote for public health expenditure. The health status of an agent is determined by a CES composite of public and private health expenditure. The existence and uniqueness of the voting equilibrium are established. A quantitative exercise reveals the importance of the relative effectiveness of public and private health expenditure and their substitutability in determining the public-private mix of health expenditure and in accounting for the observed differences across a sample of 22 advanced democratic countries.
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