Unbalanced growth and health care expenditure |
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Authors: | Chun‐Yu Ho Xin Li Weimin Zhou |
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Affiliation: | School of Economics, Antai College of Economics and Management, Shanghai Jiao Tong University, , Shanghai, China |
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Abstract: | 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. |
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Keywords: | Health care expenditure price Baumol's unbalanced growth China |
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