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THE AGGREGATE AND LOCAL ECONOMIC EFFECTS OF GOVERNMENT FINANCED HEALTH CARE
Author(s) -
Dupor Bill,
Guerrero Rodrigo
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12951
Subject(s) - spillover effect , economics , multiplier (economics) , medicaid , government spending , aggregate income , labour economics , health care , demographic economics , welfare , public economics , monetary economics , macroeconomics , economic growth , income distribution , market economy , mathematical analysis , mathematics , inequality
Government‐financed health care expenditures, through Medicare and Medicaid, have grown from roughly 0% to over 7.6% of national personal income over the past 50 years. This paper investigates the stimulative effects of Medicare spending. Using an annual, state‐level panel, we regress state income growth on own‐state spending and spending in other states, instrumented by unanticipated shocks to aggregate Medicare spending, to estimate local and spillover effects. In our benchmark specification, the own‐spending multiplier equals 1.3 and the spillover multiplier equals 0.4. The total Medicare spending multiplier (i.e., local plus spillover) is approximately 1.7. ( JEL E32, E62, H51)