Unveiling vertical state downscaling: identity and/or the economy?

State rescaling may take a variety of shapes although scant research has been carried out into the mechanisms and economic incentives that underpin rescaling processes. Recent literature in economics, economic sociology and political economy has identified at least two broad rescaling mechanisms, namely the development of regional identity - operating at the cultural level and proxing preference heterogeneity-, and the heterogeneity in levels of economic development, which influence the extent of regional redistribution. This paper empirically examines the mechanisms of vertical state rescaling by drawing upon empirical evidence from Catalonia and the Basque Country, to explore the evolution of sub-state identity and the rise of inter-territorial fiscal grievances - weakening intraregional economic solidarity. Findings corroborate the idea that the combination of widening sub-national identity raises the costs of managing heterogeneous spatial identities and strengthens support for vertical state downscaling. Similarly, ending regional fiscal solidarity it is found to increase the average income of Catalonia by 37% and even 17% in the Basque Country. However, the effect of regional identity exceeds that of regional redistribution in explaining state rescaling support in the magnitude of one to seven. These findings speak to the debate on the formation of Europe, in that they reveal limits to regional redistribution and highlight the importance of a common spatial identity

A better understanding of the behavioural constraints that people face will help policy makers to more effectively target public policy interventions that aim to change their actions

Government interventions often have very different outcomes to those desired by policy makers. Joan Costa Font argues that the development of behavioural economics offers a means to more thoroughly examine the behavioural constraints faced by those who are targeted by specific policies. Behavioural economics is not only better equipped to account for failures but if applied to public policy, it could also give rise to more effective public sector intervention

Biased Risk Perceptions of Longevity and Disability in Old Age

Rational learning theories postulate that information channels and cognitive biases such as individual optimism may influence an individuals assessment of the risk of undesired events, especially with regard to those that have a cumulative nature. This is the case with disability in old age, which may take place upon survival to an advanced age, and such factors have been regarded as responsible for certain individual behaviours (for example, the limited incidence of insurance purchase). This paper examines the determinants of individual perceptions with regard to disability in old age and longevity. The cumulative nature of such perceptions of risk is tested, and potential biases are identified, including optimism and a set of information determinants. Empirical evidence from a representative survey of Catalonia is presented to illustrate these effects. The findings from this research suggest a significant overestimation of disability in old age, yet this is not the case with longevity. Furthermore, individual perceptions with regard to disability in old age, unlike those with regard to longevity, exhibit on aggregate an optimistic bias and, are perceived as cumulative risks. Gender influences the perceived risk of disability in old age at a population level but not at the individual level, and the opposite holds true for age. Finally, self-reported health status is the main variable behind risk perceptions at both the individual and population level.longevity, disability in old age, risk perceptions, optimism, cumulative risks

The hedonic placebo effect of traditional medicines

To date, the scientific evidence on traditional medicines is scant and under-developed, yet, paradoxically individuals continue to use it and claim high satisfaction levels. What can explain this effect? Using self-collected data from Ghana we argue that variations in satisfaction across individuals can be attributed to the hedonic placebo effect gained from using traditional medicines, in which processes involved with its consumption are as important, if not more important, than measures of self-reported health outcome. Findings suggest that individuals’ health seeking behaviour should be evaluated using procedural, as well as outcome, utility

Does culture matter at all in explaining why people still use traditional medicines?

Why do individuals still use traditional medicines when modern treatments are available? Economic explanations for an individual’s use of traditional instead of modern medicines are scarce and often fail to consider explanations beyond the conventional. This paper puts forward an economic explanation for the use of traditional medicine. First, traditional medicines were the default form of health care available in pre-colonial times where industry influence was yet to develop. Hence, both those individuals who exhibit lower incomes and are left out of health insurance coverage are more likely to use traditional medicines. Second, cultural attitudes and ethnic group controls explain variation in utilisation, even among those who have health insurance. Results are suggestive of the validity of cultural interpretations

Medicines in parallel trade in the European Union: a gravity specification

While recent research has explored the phenomenon of drug parallel trade in regulated environments such as the European Union (EU), or the European Economic Area, little is known about the mechanisms that explain its origin or the role of the distribution chain in exporting and importing countries in determining its extent. By building on theoretical literature explaining the role of the distribution chain, this paper draws on an empirical specification of a gravity model to examine the determinants of inter-country flows of parallel-traded drugs. In this context, the paper deals with the effect of differences in the regulation of and competition in the distribution chain in the countries of origin and destination. The paper draws on proprietary data from the Intercontinental Medical Statistics database (for the Netherlands and other EU countries that export to the Netherlands) which identify the country of origin of parallel-imported medicines from 1997-2002 for a therapeutic group (statins) for which there is no generic competition. The study reveals that although parallel trade is a specific form of arbitrage, it is primarily a regulation-induced phenomenon. As a result, although the driving force for parallel trade is price differences across countries, the propagation mechanism lies in (a) the way drug prices are regulated across countries and (b) fragmentation and the underlying incentive structure in the wholesale distribution chain in countries where drug prices are regulated. The implications that flow from our study are that a more flexible and competitive and less fragmented (along national borders) distribution chain, particularly at wholesale level, might reduce the extent of and potential for parallel trade

An Overview of Progress in the International Regulation of the Pharmaceutical Industry

[Excerpt] “The pharmaceutical industry, a significant source of healthcare throughout the world, has several features that distinguish it from the rest of the health industry. In the last half-century, new technology, better technological know-how, and overall economic growth have led to widespread and rapid growth in the pharmaceutical sector. Advancements in pharmaceutical research and development have led to the production of drugs that can routinely combat afflictions that, only years ago, were untreatable or even fatal. Since 1970, the average share of Gross Domestic Product (GDP) on pharmaceutical goods has increased in most Organization for Economic Cooperation and Development (OECD) countries by approximately 50%, meaning that pharmaceutical expenditure has increased on average 1.5% more per year than GDP growth. Given that access to health care is fundamental to developed society and that pharmaceutical goods are a significant source of healthcare, drugs should be accessible to everyone across the world. However, universal accessibility to drugs is not an easy feat. As nations work with their pharmaceutical industries to provide the best possible access to drugs, they must do so on limited budgets and while maintaining proper incentives for pharmaceutical companies to continue to innovate. These conflicting objectives are problems unique to the pharmaceutical industry and critical to its successful future. In the European Union (EU), major steps are being made to balance these objectives through the establishment of a Single Market for Pharmaceuticals. As stated in a Commission Communication on the single market in pharmaceuticals, “The purpose of the completion of the Single Market in Pharmaceuticals is not just to provide an environment which is favorable for pharmaceutical innovation and industrial development, it is also to improve consumer choices in pharmaceuticals of the required quality, safety and efficacy, at an affordable cost.” The aim of this note is to present an overview of the major factors that are currently shaping and effecting international trade in the international pharmaceutical industry, and of how these factors contribute to the EU\u27s progression towards a single market. Through outlining the present status of the industry, we hope to facilitate the making of future decisions to reach a better balance between industry innovation and healthcare accessibility.

Does cost sharing really reduce inappropriate prescriptions?

This paper explores different empirical strategies to examine the effect of cost sharing for prescription drugs in some dimensions of medication-related quality, namely the probability of inappropriate prescription drug use among United States seniors. Using data from 1996 to 2005, we explore various specifications that correct for sample selection, endogeneity¸ and unobserved heterogeneity. We find a small, but measurable, negative price elasticity for inappropriate drug use with respect to self-reported average out-of-pocket costs for all drugs consumed. That is, user fees reduce the use of potentially inappropriate medications, however the elasticity of cost sharing is lower than that of drugs in general and the price elasticity is relatively close to zero, suggesting that any quality improvements from co-payments are small

Government intervention would be justified to prevent a potential epidemic of food disorders

Joan Costa-Font and Mireia Jofre-Bonet argue that distorted perceptions of self-image influence health-related behaviours. Through their empirical research, they find that social pressure is a determinant of eating disorders and policy should compensate against damaging peer-effects and counter the spread of this epidemi