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

Abstract: According to the OECD Norway spends 47% more on health care per capita compared to Finland and about 30% more than the other Nordic countries. At the same time indicators of health status show that Norway is not better on important indicators of health. This raises the question of why there is such a gap between spending and outcome in Norway compared to the other Nordic countries. This paper lists a number of possible explanations and quantifies their importance. The conclusion is that higher wages may explain up to 38% of the difference between Norway and Finland and differences in staff levels explain about 25%. Data errors are difficult to quantify, but the data on in long term care suggests that it accounts for at least 20% of the difference. Diminishing or zero marginal return is a controversial explanation for the lack of difference in outcomes despite higher spending and a brief review of the literature shows conflicting evidence. Finally, the last section argue that a convincing explanation of the growth of health spending should be based on a model that takes into account the fact that health care to a large extent is provided outside the free-market and that people seems to have special moral intuitions when it comes to the provision of health services as opposed to many other goods.

Keywords: Health expandures; OECD; wages; Norway

JEL-codes: H51; I10; I12

26 pages, December 14, 2009

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