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The political economy of health care finance

By Juan D. MORENO-TERNERO and John E. ROEMER

Abstract

We present a model of political competition, in a multi-dimensional policy space and with policy-oriented candidates, to analyze the problem of health care finance. In our model, health care is either financed publicly (by means of general taxation) or privately (by means of a copayment). The extent of these two components (as well as the overall tax schedule) is the outcome of the process of political competition. Our results highlight, from a political-economy perspective, the key role of technological change in explaining the widely observed phenomenon, in advanced democracies, of a rising share of total economic resources spent on health.political competition, health care finance, ideological equilibrium, technology

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