Abstract

A recent strand of the health literature claims that, for a healthier population, governments in high-income countries such as Canada should shift expenditure from health care to the provision of social services. Authors in this literature make this recommendation based on the finding that in standard static constant-parameter health models, the ratio of social services to health care spending is systematically associated with higher life expectancy and lower mortality across the OECD countries. We evaluate the robustness of this important claim to (i) likely time-variation in the model parameters (ii) delayed effects of health determinants and (iii) to disaggregation of health care spending into its major components. Methods: We conduct a longitudinal study of the comparative empirical performances of four time-varying parameter, dynamic and disaggregated health-indicator models relative to the benchmark models typically estimated in the literature, using a Canadian national dataset. Results: We find evidence that spending on social services may indeed increase life expectancy and lower mortality more than spending on health care; but this finding emerges only in dynamic models that allow for time variation in the coefficients. Disaggregation generally shows that hospital care lowers mortality by more than all other categories of spending, including social services.

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