The Effect of Health Expenditure on Inequality: A Comparison of Methods in Ghana

Jeremy Barofsky , ideas42

This paper measures the effect of health spending on economic inequality in Ghana. I compare three approaches to measuring health spending incidence: the average cost, willingness-to-pay, and aggregate returns methods. The first uses national health accounts to value the average cost of each unit of care. Willingness to pay uses revealed preference care choices and the opportunity cost of accessing care to estimate demand elasticities. The third method, aggregate returns, estimates incidence of health system spending based on its conceptual components such as public subsidies for health care, financial risk protection and improvements in health status. I find that the average cost and willingness-to-pay methods measure similar aspects of health system spending and so produce similar and small effects on income inequality. In contrast, because the aggregate-returns method also incorporates the value of averted mortality and risk protection, it shows that health spending sharply reduces income inequality.

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 Presented in Session 8. Economy, Labor Force, Education, & Inequality