Income and Health Spending: Evidence from Oil Price Shocks

By Daron Acemoglu, Amy Finkelstein, Matt Notowidigdo. Review of Economics and Statistics, 2013

250 citations recorded by the source corpus.

Abstract Health expenditures as a share of GDP in the United States have more than tripled over the past half-century. A common conjecture is that this is a consequence of rising income. We investigate this hypothesis by instrumenting for local area income with time series variation in oil prices interacted with local oil reserves. This strategy enables us to capture both partial equilibrium and local general equilibrium effects of income on health expenditures. Our central income elasticity estimate is 0.7, with 1.1 as the upper end of the 95% confidence interval, which suggests that rising income is unlikely to be a major driver of the rising health expenditure share of GDP.

Subfields: Demography, Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/4530b41684c8270b5dd227c2682598e3c9dc057e

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Citations in the corpus

Determinants of U.S. health expenditure: Evidence from autoregressive distributed lag (ARDL) approach to cointegration (2016, methodology): “In light of these developments, we expect the coefficients of INCOME, AGE and HRD to differ from Okunade and Murthy (2002). Furthermore, this study employs a very different estimation procedure than applied in their investigation.”
Employment, Wages, and Voter Turnout (2013, background): “Acemoglu et al (2009) use the impact of oil price shocks on the economies of areas in the South with large oil wells to study health spending.”