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Article

Price Regulation and Pay-for-Performance in Public Health Systems  

Luigi Siciliani

Payment systems based on fixed prices have become the dominant model to finance hospitals across OECD countries. In the early 1980s, Medicare in the United States introduced the diagnosis-related group (DRG) system. The idea was that hospitals should be paid a fixed price for treating a patient within a given diagnosis or treatment. The system then spread to other European countries (e.g., France, Germany, Italy, Norway, Spain, the United Kingdom) and high-income countries (e.g., Canada, Australia). The change in payment system was motivated by concerns over rapid health expenditure growth and replaced financing arrangements based on reimbursing costs (e.g., in the United States) or fixed annual budgets (e.g., in the United Kingdom). A more recent policy development is the introduction of pay-for-performance (P4P) schemes, which, in most cases, pay directly for higher quality. This is also a form of regulated price payment but the unit of payment is a (process or outcome) measure of quality, as opposed to activity, that is admitting a patient with a given diagnosis or a treatment. Fixed price payment systems, either of the DRG type or the P4P type, affect hospital incentives to provide quality, contain costs, and treat the right patients (allocative efficiency). Quality and efficiency are ubiquitous policy goals across a range of countries. Fixed price regulation induces providers to contain costs and, under certain conditions (e.g., excess demand), offer some incentives to sustain quality. But payment systems in the health sector are complex. Since its inception, DRG systems have been continuously refined. From their initial (around) 500 tariffs, many DRG codes have been split in two or more finer ones to reflect heterogeneity in costs within each subgroup. In turn, this may give incentives to provide excessive intensive treatments or to code patients in more remunerative tariffs, a practice known as upcoding. Fixed prices also make it financially unprofitable to treat high cost patients. This is particularly problematic when patients with the highest costs have the largest benefits from treatment. Hospitals also differ systematically in costs and other dimensions, and some of these external differences are beyond their control (e.g., higher cost of living, land, or capital). Price regulation can be put in place to address such differences. The development of information technology has allowed constructing a plethora of quality indicators, mostly process measures of quality and in some cases health outcomes. These have been used both for public reporting, to help patients choose providers, but also for incentive schemes that directly pay for quality. P4P schemes are attractive but raise new issues, such as they might divert provider attention and unincentivized dimensions of quality might suffer as a result.

Article

Price Regulation and Pharmaceuticals  

A. McGuire

Pharmaceutical expenditure accounts for approximately 20% of healthcare expenditure across the Organisation for Economic Cooperation and Development (OECD) countries. Pharmaceutical products are regulated in all major global markets primarily to ensure product quality but also to regulate the reimbursed prices of insurance companies and central purchasing authorities that dominate this sector. Price regulation is justified as patent protection, which acts as an incentive to invest in R&D given the difficulties in appropriating the returns to such activity and creates monopoly rights to suppliers. Price regulation does itself reduce the ability of producers’ to recapture the substantial R&D investment costs incurred. Traditional price regulation through Ramsey pricing and yardstick competition is not efficient given the distortionary impact of insurance holdings, which are extensive in this sector and the inherent uncertainties that characterize Research and Development (R&D) activity. A range of other pricing regulations aimed at establishing pharmaceutical reimbursement that covers both dynamic efficiency (tied to R&D incentives) and static efficiency (tied to reducing monopoly rents) have been suggested. These range from cost-plus pricing, to internal and external reference pricing, rate-of-return pricing and, most recently value-based (essential health benefit maximization) pricing. Reimbursed prices reflecting value based pricing are, in some countries, associated with clinical treatment guidelines and cost-effectiveness analysis. Some countries are also requiring or allowing post-launch price regulation thorough a range of patient access agreements based on predefined population health targets and/or financial incentives. There is no simple, single solution to the determination of dynamic and static efficiency in this sector given the uncertainty associated with innovation, the large monopoly interests in the area, the distortionary impact of health insurance and the informational asymmetries that exist across providers and purchasers.

Article

Problem Structuring in Economic Evaluation  

Rita Faria

Economic evaluation provides a framework to help inform decisions on which technologies represent the best use of healthcare resources (i.e., are cost-effective) by bringing together the available evidence about the benefits and costs of the alternative options. Critical to the economic evaluation framework is the need to accurately characterize the decision problem—this is the problem-structuring stage. Problem structuring encompasses the characterization of the target population; identification of the decision options to compare in the model (e.g., use of the technology in different ways, standard of care, etc.); and the development of the conceptual model, which maps out how the decision options relate to the costs and benefits in the target population. Problem structuring is central to the application of the economic evaluation framework and to development of the analysis, as it determines the specific questions that can be addressed and affects the relevance and credibility of the results. The methodological guidelines discuss problem structuring to some extent, although the practical implications warrant further consideration. With respect to the target population, questions emerge about how to define it, whether and which sources of heterogeneity to consider, and when and in whom to consider spillovers. Relating to the specification of decision options are questions about how to identify and select them, including restricting the comparison to standard of care, sequences of tests and/or treatments, and “do-nothing” approaches. There are also issues relating to the role and the process of development of the conceptual model. Based on a review of methodological guidelines and reflections on their implications, various recommendations for practice emerge. The process of developing the conceptual model and how to use it to inform choices and assumptions in the economic evaluation are two areas where further research is warranted.

Article

Public Finance and Soft Budgets  

Rosella Levaggi

The concept of soft budget constraint, describes a situation where a decision maker finds it impossible to keep an agent to a fixed budget. In healthcare it may refer to a (nonprofit) hospital that overspends, or to a lower government level that does not balance its accounts. The existence of a soft budget constraint may represent an optimal policy from the regulator point of view only in specific settings. In general, its presence may allow for strategic behavior that changes considerably its nature and its desirability. In this article, soft budget constraint will be analyzed along two lines: from a market perspective and from a fiscal federalism perspective. The creation of an internal market for healthcare has made hospitals with different objectives and constraints compete together. The literature does not agree on the effects of competition on healthcare or on which type of organizations should compete. Public hospitals are often seen as less efficient providers, but they are also intrinsically motivated and/or altruistic. Competition for quality in a market where costs are sunk and competitors have asymmetric objectives may produce regulatory failures; for this reason, it might be optimal to implement soft budget constraint rules to public hospitals even at the risk of perverse effects. Several authors have attempted to estimate the presence of soft budget constraint, showing that they derive from different strategic behaviors and lead to quite different outcomes. The reforms that have reshaped public healthcare systems across Europe have often been accompanied by a process of devolution; in some countries it has often been accompanied by widespread soft budget constraint policies. Medicaid expenditure in the United States is becoming a serious concern for the Federal Government and the evidence from other states is not reassuring. Several explanations have been proposed: (a) local governments may use spillovers to induce neighbors to pay for their local public goods; (b) size matters: if the local authority is sufficiently big, the center will bail it out; equalization grants and fiscal competition may be responsible for the rise of soft budget constraint policies. Soft budget policies may also derive from strategic agreements among lower tiers, or as a consequence of fiscal imbalances. In this context the optimal use of soft budget constraint as a policy instrument may not be desirable.

Article

Qualitative Methods in Health Economics  

Joanna Coast and Manuela De Allegri

Qualitative methods are being used increasingly by health economists, but most health economists are not trained in these methods and may need to develop expertise in this area. This article discusses important issues of ontology, epistemology, and research design, before addressing the key issues of sampling, data collection, and data analysis in qualitative research. Understanding differences in the purpose of sampling between qualitative and quantitative methods is important for health economists, and the key notion of purposeful sampling is described. The section on data collection covers in-depth and semistructured interviews, focus-group discussions, and observation. Methods for data analysis are then discussed, with a particular focus on the use of inductive methods that are appropriate for economic purposes. Presentation and publication are briefly considered, before three areas that have seen substantial use of qualitative methods are explored: attribute development for discrete choice experiment, priority-setting research, and health financing initiatives.

Article

Quality in Nursing Homes  

Matteo Lippi Bruni, Irene Mammi, and Rossella Verzulli

In developed countries, the role of public authorities as financing bodies and regulators of the long-term care sector is pervasive and calls for well-planned and informed policy actions. Poor quality in nursing homes has been a recurrent concern at least since the 1980s and has triggered a heated policy and scholarly debate. The economic literature on nursing home quality has thoroughly investigated the impact of regulatory interventions and of market characteristics on an array of input-, process-, and outcome-based quality measures. Most existing studies refer to the U.S. context, even though important insights can be drawn also from the smaller set of works that covers European countries. The major contribution of health economics to the empirical analysis of the nursing home industry is represented by the introduction of important methodological advances applying rigorous policy evaluation techniques with the purpose of properly identifying the causal effects of interest. In addition, the increased availability of rich datasets covering either process or outcome measures has allowed to investigate changes in nursing home quality properly accounting for its multidimensional features. The use of up-to-date econometric methods that, in most cases, exploit policy shocks and longitudinal data has given researchers the possibility to achieve a causal identification and an accurate quantification of the impact of a wide range of policy initiatives, including the introduction of nurse staffing thresholds, price regulation, and public reporting of quality indicators. This has helped to counteract part of the contradictory evidence highlighted by the strand of works based on more descriptive evidence. Possible lines for future research can be identified in further exploration of the consequences of policy interventions in terms of equity and accessibility to nursing home care.

Article

Race and the Economics Professoriate in the United States  

Gregory N. Price

In 1894, W. E. B. Dubois completed coursework for a doctorate in economics at the University of Berlin, and in 1921, Sadie Alexander was the first Black American to earn a doctorate in economics at the University of Pennsylvania. Notwithstanding these rare early accomplishments by Black Americans in economics, there seems to be a more than one century “color line” in the hiring of Black economists in the United States academic labor market. The persistence of Black economist underrepresentation in economics faculties in the United States suggests that a color line constraining the hiring of Black economics faculty endures. In general, and in particular among economics doctorate–granting institutions in the United States, when sorting them by the number of Black Americans on the economics faculty, the median economics department has no Black economics faculty. Findings from the extant literature on the hiring and representation of Black economists suggest that the underrepresentation of Black PhD economists in economics faculties is consistent with, and conforms to, a history of racially discriminatory employment exclusion. This color line could be constraining the production of economics knowledge that can inform public policies that would reduce racial inequality and improve the material living standards of Black Americans in the United States. Future research on the underrepresentation of Black PhD economists in economics faculties in the United States could potentially benefit from accounting for unobservables that may matter for the supply and demand of Black PhD economists. This includes, but is not limited to, what is not observed about individual PhD economist mentoring experiences and parental occupational backgrounds.

Article

The Rationale for Interventions to Foster Child Development  

Samuel Berlinski and Marcos Vera-Hernández

Socioeconomic gradients in health, cognitive, and socioemotional skills start at a very early age. Well-designed policy interventions in the early years can have a great impact in closing these gaps. Advancing this line of research requires a thorough understanding of how households make human capital investment decisions on behalf of their children, what their information set is, and how the market, the environment, and government policies affect them. A framework for this research should describe how children’s skills evolve and how parents make choices about the inputs that model child development, as well as the rationale for government interventions, including both efficiency and equity considerations.

Article

Religiosity and Development  

Jeanet Sinding Bentzen

Economics of religion is the application of economic methods to the study of causes and consequences of religion. Ever since Max Weber set forth his theory of the Protestant ethic, social scientists have compared socioeconomic differences across Protestants and Catholics, Muslims, and Christians, and more recently across different intensities of religiosity. Religiosity refers to an individual’s degree of religious attendance and strength of beliefs. Religiosity rises with a growing demand for religion resulting from adversity and insecurity or a surging supply of religion stemming from increasing numbers of religious organizations, for instance. Religiosity has fallen in some Western countries since the mid-20th century, but has strengthened in several other societies around the world. Religion is a multidimensional concept, and religiosity has multiple impacts on socioeconomic outcomes, depending on the dimension observed. Religion covers public religious activities such as church attendance, which involves exposure to religious doctrines and to fellow believers, potentially strengthening social capital and trust among believers. Religious doctrines teach belief in supernatural beings, but also social views on hard work, refraining from deviant activities, and adherence to traditional norms. These norms and social views are sometimes orthogonal to the general tendency of modernization, and religion may contribute to the rising polarization on social issues regarding abortion, LGBT rights, women, and immigration. These norms and social views are again potentially in conflict with science and innovation, incentivizing some religious authorities to curb scientific progress. Further, religion encompasses private religious activities such as prayer and the particular religious beliefs, which may provide comfort and buffering against stressful events. At the same time, rulers may exploit the existence of belief in higher powers for political purposes. Empirical research supports these predictions. Consequences of higher religiosity include more emphasis on traditional values such as traditional gender norms and attitudes against homosexuality, lower rates of technical education, restrictions on science and democracy, rising polarization and conflict, and lower average incomes. Positive consequences of religiosity include improved health and depression rates, crime reduction, increased happiness, higher prosociality among believers, and consumption and well-being levels that are less sensitive to shocks.

Article

Returns to Health Spending in Low- and Middle-Income Countries  

Ijeoma Peace Edoka

Low- and middle-income countries (LMICs) bear a disproportionately high burden of diseases in comparison to high-income countries, partly due to inequalities in the distribution of resources for health. Recent increases in health spending in these countries demonstrate a commitment to tackling the high burden of disease. However, evidence on the extent to which increased spending on health translates to better population health outcomes has been inconclusive. Some studies have reported improvements in population health with an increase in health spending whereas others have either found no effect or very limited effect to justify increased financial allocations to health. Differences across studies may be explained by differences in approaches adopted in estimating returns to health spending in LMICs.

Article

The Role of Incentives for Improving Students’ Motivation and Performance  

Andreas Fidjeland

Although the returns to education can be substantial, many students underperform in school, for example, by not putting in sufficient effort. To mitigate this underinvestment problem, policymakers are often eager to try to motivate students using extrinsic incentives, such as cash payments and merit scholarships, stricter grading standards, and more competitive admission processes. The design, scope, and implementation of such incentive policies with the goal of affecting student motivation and study habits have been a fruitful area of economic research over the last 30 years. However, the evidence on their potency for improving student performance is mixed. In particular, the use of extrinsic incentives often elicit strategic responses from students, resulting in behavior that might improve performance metrics, but are not productive in terms of learning and skill development. Many incentive policies have therefore ended up producing unintended consequences that goes contrary to the policy objective. As incentives are everywhere in any school system, economists should pursue a better understanding of how they affect which outcomes students focus on, the choices they make, and how these effects differ across groups of students. Broadening the scope of outcomes considered when assessing the effects of incentives, in particular a greater focus on what student’s choose not to do, could provide a fruitful foundation for future research.

Article

School Choice and Accountability  

Simon Burgess and Ellen Greaves

School choice and accountability are both mechanisms initially designed to improve standards of education in publicly provided schools, although they have been introduced worldwide with alternative motivations such as to promote equality of access to “good” schools. Economists were active in the initial design of school choice and accountability systems, and continue to advise and provide evidence to school authorities to improve the functioning of the “quasi-market.” School choice, defined broadly, is any system in which parents’ preferences over schools are an input to their child’s allocation to school. Milton Friedman initially hypothesized that school choice would increase the diversity of education providers and improve schools’ productivity through competition. As in the healthcare sector and other public services, “quasi-markets” can respond to choice and competition by improving standards to attract consumers. Theoretical and empirical work have interrogated this prediction and provided conditions for this prediction to hold. Another reason is to promote equality of access to “good” schools and therefore improve social mobility. Rather than school places being rationed through market forces in the form of higher house prices, for example, school choice can promote equality of access to popular schools. Research has typically considered the role of school choice in increasing segregation between different groups of pupils, however, due to differences in parents’ preferences for school attributes and, in some cases, the complexity of the system. School accountability is defined as the public provision of school-performance information, on a regular basis, in the same format, and using independent metrics. Accountability has two functions: providing incentives for schools, and information for parents and central authorities. School choice and accountability are linked, in that accountability provides information to parents making school choices, and school choice multiplies the incentive effect of public accountability. Research has studied the effect of school accountability on pupils’ attainment and the implications for teachers as an intermediate mechanism.

Article

Shared Prosperity: Concepts, Data, and Some Policy Examples  

Francisco H. G. Ferreira, Emanuela Galasso, and Mario Negre

“Shared prosperity” is a common phrase in current development policy discourse. Its most widely used operational definition—the growth rate in the average income of the poorest 40% of a country’s population—is a truncated measure of change in social welfare. A related concept, the shared prosperity premium—the difference between the growth rate of the mean for the bottom 40% and the growth rate in the overall mean—is similarly analogous to a measure of change in inequality. This article reviews the relationship between these concepts and the more established ideas of social welfare, poverty, inequality, and mobility. Household survey data can be used to shed light on recent progress in terms of this indicator globally. During 2008–2013, mean incomes for the poorest 40% rose in 60 of the 83 countries for which we have data. In 49 of them, accounting for 65% of the sampled population, it rose faster than overall average incomes, thus narrowing the income gap. In the policy space, there are examples both of “pre-distribution” policies (which promote human capital investment among the poor) and “re-distribution” policies (such as targeted safety nets), which when well-designed have a sound empirical track record of both raising productivity and improving well-being among the poor.

Article

Social Interactions in Health Behaviors and Conditions  

Ana Balsa and Carlos Díaz

Health behaviors are a major source of morbidity and mortality in the developed and much of the developing world. The social nature of many of these behaviors, such as eating or using alcohol, and the normative connotations that accompany others (i.e., sexual behavior, illegal drug use) make them quite susceptible to peer influence. This chapter assesses the role of social interactions in the determination of health behaviors. It highlights the methodological progress of the past two decades in addressing the multiple challenges inherent in the estimation of peer effects, and notes methodological issues that still need to be confronted. A comprehensive review of the economics empirical literature—mostly for developed countries—shows strong and robust peer effects across a wide set of health behaviors, including alcohol use, body weight, food intake, body fitness, teen pregnancy, and sexual behaviors. The evidence is mixed when assessing tobacco use, illicit drug use, and mental health. The article also explores the as yet incipient literature on the mechanisms behind peer influence and on new developments in the study of social networks that are shedding light on the dynamics of social influence. There is suggestive evidence that social norms and social conformism lie behind peer effects in substance use, obesity, and teen pregnancy, while social learning has been pointed out as a channel behind fertility decisions, mental health utilization, and uptake of medication. Future research needs to deepen the understanding of the mechanisms behind peer influence in health behaviors in order to design more targeted welfare-enhancing policies.

Article

The Spatial Dimension of Health Systems  

Elisa Tosetti, Rita Santos, Francesco Moscone, and Giuseppe Arbia

The spatial dimension of supply and demand factors is a very important feature of healthcare systems. Differences in health and behavior across individuals are due not only to personal characteristics but also to external forces, such as contextual factors, social interaction processes, and global health shocks. These factors are responsible for various forms of spatial patterns and correlation often observed in the data, which are desirable to include in health econometrics models. This article describes a set of exploratory techniques and econometric methods to visualize, summarize, test, and model spatial patterns of health economics phenomena, showing their scientific and policy power when addressing health economics issues characterized by a strong spatial dimension. Exploring and modeling the spatial dimension of the two-sided healthcare provision may help reduce inequalities in access to healthcare services and support policymakers in the design of financially sustainable healthcare systems.

Article

Strategies to Counteract Risk Selection in Social Health Insurance Markets  

Richard C. van Kleef, Thomas G. McGuire, Frederik T. Schut, and Wynand P. M. M. van de Ven

Many countries rely on social health insurance supplied by competing insurers to enhance fairness and efficiency in healthcare financing. Premiums in these settings are typically community rated per health plan. Though community rating can help achieve fairness objectives, it also leads to a variety of problems due to risk selection, that is, actions by consumers and insurers to exploit “unpriced risk” heterogeneity. From the viewpoint of a consumer, unpriced risk refers to the gap between her expected spending under a health plan and the net premium for that plan. Heterogeneity in unpriced risk can lead to selection by consumers in and out of insurance and between high- and low-value plans. These forms of risk selection can result in upward premium spirals, inefficient take-up of basic coverage, and inefficient sorting of consumers between high- and low-value plans. From the viewpoint of an insurer, unpriced risk refers to the gap between his expected costs under a certain contract and the revenues he receives for that contract. Heterogeneity in unpriced risk incentivizes insurers to alter their plan offerings in order to attract profitable people, resulting in inefficient plan design and possibly in the unavailability of high-quality care. Moreover, insurers have incentives to target profitable people via marketing tools and customer service, which—from a societal perspective—can be considered a waste of resources. Common tools to counteract selection problems are risk equalization, risk sharing, and risk rating of premiums. All three strategies reduce unpriced risk heterogeneity faced by insurers and thus diminish selection actions by insurers such as the altering of plan offerings. Risk rating of premiums also reduces unpriced risk heterogeneity faced by consumers and thus mitigates selection in and out of insurance and between high- and low-value plans. All three strategies, however, come with trade-offs. A smart blend takes advantage of the strengths, while reducing the weaknesses of each strategy. The optimal payment system configuration will depend on how a regulator weighs fairness and efficiency and on how the healthcare system is organized.

Article

Supplementary Health Insurance and Regulation of Healthcare Systems  

Brigitte Dormont

Most developed nations provide generous coverage of care services, using either a tax financed healthcare system or social health insurance. Such systems pursue efficiency and equity in care provision. Efficiency means that expenditures are minimized for a given level of care services. Equity means that individuals with equal needs have equal access to the benefit package. In order to limit expenditures, social health insurance systems explicitly limit their benefit package. Moreover, most such systems have introduced cost sharing so that beneficiaries bear some cost when using care services. These limits on coverage create room for private insurance that complements or supplements social health insurance. Everywhere, social health insurance coexists along with voluntarily purchased supplementary private insurance. While the latter generally covers a small portion of health expenditures, it can interfere with the functioning of social health insurance. Supplementary health insurance can be detrimental to efficiency through several mechanisms. It limits competition in managed competition settings. It favors excessive care consumption through coverage of cost sharing and of services that are complementary to those included in social insurance benefits. It can also hinder achievement of the equity goals inherent to social insurance. Supplementary insurance creates inequality in access to services included in the social benefits package. Individuals with high incomes are more likely to buy supplementary insurance, and the additional care consumption resulting from better coverage creates additional costs that are borne by social health insurance. In addition, there are other anti-redistributive mechanisms from high to low risks. Social health insurance should be designed, not as an isolated institution, but with an awareness of the existence—and the possible expansion—of supplementary health insurance.

Article

Tax Audits, Economics, and Racism  

Francine J. Lipman

Since 2010, Congress has significantly cut the annual budget of the Internal Revenue Service (IRS) while requiring the IRS to manage more responsibilities, including last-minute comprehensive tax reform, health care, broad-based antipoverty relief, and a variety of economic stimulus provisions. As a result, the IRS has sustained across-the-board decreases in staffing, with the most significant decreases in tax enforcement personnel. The IRS has fewer auditors than at any time since World War II, despite an explosion of concentrated income and wealth. Predictably, the tax gap, the difference between what taxpayers owe and what taxpayers pay, has skyrocketed to almost $1 trillion a year. Economists have estimated that funding the IRS will pay for itself severalfold, raising more than a trillion dollars of uncollected tax revenues over a decade. Despite evidence that funding will remedy budget shortfalls severalfold, Congress continues to defund the IRS. While the bulk of the tax gap is due to unreported income by high-income individuals, the audit rate of these households has dropped precipitously. By comparison, the lowest income wage earners are being audited five times more often than all other taxpayers. Given centuries of racist policies in the United States, households of color are disproportionately impoverished and white households are disproportionately wealthy. Accordingly, lower income working families of color, especially in the South, are audited at rates higher than their white northern counterparts. Moreover, because these households and the IRS have limited resources, many of these audits result in taxpayers losing antipoverty benefits that they have properly claimed. This discriminatory treatment is counter to Congressional intent to support these families and exacerbates existing racial income and wealth gaps. With President Biden’s 2021 executive order on advancing racial equity and support for underserved communities through the federal government, the U.S. Treasury, IRS, and Congress have been charged to “recognize and work to redress inequities in their policies and programs that serve as barriers to equal opportunity.” Properly funding the IRS is a necessary step to advancing racial equity.

Article

Technology, Productivity, and Costs in Healthcare  

Albert A. Okunade and Ahmad Reshad Osmani

Healthcare cost encompasses expenditures on the totality of scarce resources (implicit and explicit) given up (or allocated) to produce healthcare goods (e.g., drugs and medical devices) and services (e.g., hospital care and physician office services are major components). Healthcare cost accounting components (sources and uses of funds) tend to differ but can be similar enough across most of the world countries. The healthcare cost concept usually differs for consumers, politicians and health policy decision-makers, health insurers, employers, and the government. All else given, inefficient healthcare production implies higher economic cost and lower productivity of the resources deployed in the process. Healthcare productivity varies across health systems of the world countries, the production technologies used, regulatory instruments, and institutional settings. Healthcare production often involves some specific (e.g., drugs and medical devices, information and communication technologies) or general technology for diagnosing, treating, or curing diseases in order to improve or restore human health conditions. In the last half century, the different healthcare systems of the world countries have undergone fundamental transformations in the structural designs, institutional regulations, and socio-economic and demographic dimensions. The nations have allocated a rising share of total economic resources or incomes (i.e., Gross National Product, or GDP) to the healthcare sector and are consequently enjoying substantial increases in population health status and life expectancies. There are complex and interacting linkages among escalating healthcare costs, longer life expectancies, technological progress (or “the march of science”), and sectoral productivities in the health services sectors of the advanced economies. Healthcare policy debates often concentrate on cost-containment strategies and search for improved efficient resource allocation and equitable distribution of the sector’s outputs. Consequently, this contribution is a broad review of the body of literature on technological progress, productivity, and cost: three important dimensions of the evolving modern healthcare systems. It provides a logical integration of three strands of work linking healthcare cost to technology and research evidence on sectoral productivity measurements. Finally, some important aspects of the existing study limitations are noted to motivate new research directions for future investigations to explore in the growing health sector economies.

Article

The 1918–1919 Influenza Pandemic in Economic History  

Martin Karlsson, Daniel Kühnle, and Nikolaos Prodromidis

Due to the similarities with the COVID–19 pandemic, there has been a renewed interest in the 1918–1919 influenza pandemic, which represents the most severe pandemic of the 20th century with an estimated total death toll ranging between 30 and 100 million. This rapidly growing literature in economics and economic history has devoted attention to contextual determinants of excess mortality in the pandemic; to the impact of the pandemic on economic growth, inequality, and a range of other outcomes; and to the impact of nonpharmaceutical interventions. Estimating the effects of the pandemic, or the effects of countermeasures, is challenging. There may not be much exogenous variation to go by, and the historical data sets available are typically small and often of questionable quality. Yet the 1918–1919 pandemic offers a unique opportunity to learn how large pandemics play out in the long run. The studies evaluating effects of the pandemic, or of policies enacted to combat it, typically rely on some version of difference-in-differences, or instrumental variables. The assumptions required for these designs to achieve identification of causal effects have rarely been systematically evaluated in this particular historical context. Using a purpose-built dataset covering the entire Swedish population, such an assessment is provided here. The empirical analysis indicates that the identifying assumptions used in previous work may indeed be satisfied. However, the results cast some doubt on the general external validity of previous findings as the analysis fails to replicate several results in the Swedish context. These disagreements highlight the need for additional studies in other populations and contexts which puts the spotlight on further digitization and linkage of historical datasets.