A Quick Reaction to Matt Yglesias’s Healthcare Chart

Here’s a chart that Matt Yglesias thinks ought to dominate the healthcare conversation. It compares PPP adjusted per capita government* spending on healthcare in the US and in Canada.

When I saw it this morning, I thought that it looks a lot like productivity, which could be consistent with the idea that the US is richer than Canada and that countries spend more on healthcare as they get richer (Hall & Jones). But the evidence for that is less than clear cut (e.g. Acemoglu , Finkelstein, and Notowidigdo) – another story is that productivity in some sectors is driving up healthcare costs (Baumol’s cost disease), and that the US is more productive than Canada. In other words, this picture could simply reflect productivity differences across the two countries. I very quickly pulled some data together from the first site I found on google with productivity data and put together this chart of output per worker (which ignores capital and factor quality differences) and it looks a lot like Matt’s chart.

Screen Shot 2013-01-23 at 9.55.24 AM


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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2 Responses to A Quick Reaction to Matt Yglesias’s Healthcare Chart

  1. Madjay says:

    The key point you haven’t mentioned is that this is PUBLIC healthcare expenditure – the US relies far more on private sector healthcare expenditure, and Matt’s point that it still spends more on publically-funded healthcare. For your analysis, surely you should be looking at total healthcare expenditure?

  2. Julia says:

    Its like you read my mind! You seem to know a lot about this, like you wrote the book in it
    or something. I think that you could do with a few pics to drive the message home a bit, but other than that,
    this is excellent blog. An excellent read. I will certainly
    be back.

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