Health care expenditure decisions in the presence of devolution and equalisation grants

Abstract

In a model where health care provision, its regional distribution and the equalisation grant are the result of a utilitarian bargaining between a (relatively) rich region and a poor one, a First Best solution can be reached only if the two Regions have the same bargaining power. From a policy point of view, our model may explain the observed cross-national differences in the redistributive power of health care expenditure and it suggests that to equalise resources across Regions an income based equalisation grant may be preferred because it causes less distortions than an expenditure based one.

Efficiency and equity effects of healthcare decentralization: evidence from Italy

“…In addition, efficiency arguments for decentralization generally apply to pure public goods, while healthcare services are rather merit goods. For these goods there is seldom a comparative advantage in local production (Levaggi and Menoncin, 2014). Rather, the reasons for devolution may rest in a reduction of solidarity among jurisdictions (Calsamiglia et al, 2006;Dirindin, 2019).…”

Devolution and grant-in-aid design for the provision of impure public goods

“…As in Besley and Coate ( 2003 ), we assume that utility is additive in its components and that taxation is linear. The use of a linear utility function allows concentrate the analysis on efficiency and to rule out distributional issues (Levaggi and Menoncin 2014 ).…”

“…For the purpose of this analysis such assumption is irrelevant. Petretto ( 2000 ) and Levaggi and Menoncin ( 2014 ) present a model with these characteristics as regards the distribution of income.…”