Does Ageing Call for a Reform of the Health Care Sector?
A popular view is that ageing populations increase health expenditure to GDP ratios because health expenditure correlates positively with age and because the concomitant shrinking of the labour force depresses GDP. The resulting increase in transfers from the young to the old then calls for a reform of health care policies. This article critically examines the arguments underlying this view. It gives credit to factors that counteract the expenditure effect, the effects upon health care market and labour market distortions and the effects upon intergenerational solidarity. Although important, these factors are found to have insufficient weight to invalidate the popular view. (JEL: H21, I10, J10)
* Ed Westerhout is affiliated with CPB Netherlands Bureau for Economic Policy Analysis, PO Box 80510, 2508 GM The Hague, The Netherlands, e-mail: westerhout{at}cpb.nl
The views expressed in this article are not necessarily those of CPB. The author thanks the referee for useful comments.
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