Scandinavian Working Papers in Economics

HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

No 2002:4: Redistribution at the hospital

Anne Wenche Emblem ()
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Anne Wenche Emblem: Faculty of Economics and Social Science, Postal: Agder University, Servicebox 422, N-4604 Kristiansand, Norway

Abstract: This paper studies redistribution by means of a public supply of medical treatment. We show that the government can redistribute income towards low-ability individuals in a world of asymmetric information by offering bundles of medical treatment and redistributive payment. If self-selection is a problem, then the separating scheme offers high-ability individuals complete treatment against a high payment, and low-ability individuals partial treatment against a low payment. In particular, the level of treatment offered low-ability individuals is distorted downwards.

Keywords: health; medical treatment; insurance; redistribution; self-selection

JEL-codes: D81; H42; I18

19 pages, June 29, 2009

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