Bengt Jönsson

Comparisons of aggregate health expenditure across different countries have become popular over the last three decades as they permit a systematic investigation of the impact of different institutional regimes and other explanatory variables. Over the years, several regression analyses based on cross-section and panel data have been used to explain the international differences in health expenditure. A common result of these studies is that aggregate income appears to be the most important factor explaining health expenditure variation between countries and that the size of the estimated income elasticity is high and even higher than unity which in that case indicates that health care is a “luxury” good. Additional results indicates, for example, that the use of primary care “gatekeepers” lowers health expenditure and also that the way of remunerating physicians in the ambulatory care sector appears to influence health expenditure; capitation systems tend to lead to lower expenditure than fee-for-service systems. Finally, we also list some issues for the future. We demand more efforts on theory of the macroeconomic analysis of health expenditure, which is underdeveloped at least relative to the macroeconometrics of health expenditure. We also demand more replications based on updated data and methods that seeks to unify the many differing results of previous Studies.

Attempts to place a monetary value on health changes is an important field for both environmental economists and health economists. Typically, a change in environmental quality has direct or indirect impact on human health, which forces the environmental economist to try to assess the value of health changes. For the health economist, evaluating a medical treatment requires that the benefits of the treatment somehow are valued in monetary terms. In both cases risk or uncertainty pertains to the effects. A pollution treatment plant and a medical treatment both shift the probability that individuals will experience a particular health state.

The pharmaceutical industry is a young industry. The majority of the drugs used today have been introduced during the last fifty years. In Sweden, 75 per cent of sales are referable to drugs (specialities) that are 15 years old or less (see Berlin and Jönsson, 1985). It is also a heavily regulated industry. Pharmaceuticals have been regulated since the seventeenth century in Sweden. From the beginning, it was the pharmacies that were regulated, but since the 1930s the industry has been the focus of regulation. During the last three decades, the regulation of safety and efficacy has become increasingly stringent. In Sweden, the prices of pharmaceuticals have also been regulated since 1934.