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Welfare-improving policy on medical tourism and labor productivity: A theoretical analysis
Institution:1. College of Business, Department of Economics, University of Texas at San Antonio, San Antonio, TX 78249, USA;2. Department of Economics, Feng Chia University, Taichung, Taiwan,;3. Department of Finance, Deakin Business School, Deakin University, Geelong 3125, Australia;1. Department of Economics, University of Siegen, 57068 Siegen, Germany;2. CESifo, München, Germany;1. Department of Quantitative Economics, School of Economics and Business, University of Sarajevo, Sarajevo, Bosnia and Herzegovina;2. World Bank, Washington DC, United States;1. Research Institute for Banking, Banking Academy of Vietnam, No.12 Chua Boc, Dong Da, Hanoi, Viet Nam;2. International Business Faculty, Banking Academy of Vietnam, No.12 Chua Boc, Dong Da, Hanoi, Viet Nam;1. Bocconi University, Italy;2. International Monetary Fund & CEPR, United States;1. School of Public Administration, Southwestern University of Finance and Economics, Chengdu, China;2. IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France;3. School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, China;4. College of Arts and Science, The Ohio State University, Columbus, United States
Abstract:This paper considers welfare and wage inequality effects of developing medical tourism on the host country from a theoretical point of view. Due to the competition between public healthcare provision and medical tourism, the development of medical tourism might reduce labor productivity and thus widen wage inequality via the increased wage rates of healthcare workers and decreased wage rates of production workers. In addition, the expansion of medical tourism can lower social welfare of the host country through a decline in labor productivity caused by reduced public healthcare provision. A tax-subsidy welfare-improving scheme is suggested to mitigate the unfavorable productivity effect of medical tourism on the host economy. This theoretical result fits into current empirical evidence on medical tourism.
Keywords:Medical tourism  Labor productivity  Cross subsidization  Wage inequality  Social welfare
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