Normann Lorenz

Health Care Expenditures and Longevity: Is There a Eubie Blake Effect?

Abstract It is still an open question whether increasing life expectancy as such causes higher health care expenditures (HCE) in a population. According to the “red herring” hypothesis, the positive correlation between age and HCE is exclusively due to the fact that mortality rises with age and a large share of HCE is caused by proximity to death. As a consequence, rising longevity—through falling mortality rates—may even reduce HCE. However, a weakness of many previous empirical studies is that they use cross-sectional evidence to make inferences on a development over time. In this paper, we analyse the impact of rising longevity on the trend of HCE over time by using data from a pseudo-panel of German sickness fund members over the period 1997–2009. Using (dynamic) panel data models, we find that age, mortality and 5-year survival rates each have a positive impact on per-capita HCE. Our explanation for the last finding is that physicians treat patients more aggressively if the results of these treatments pay off over a longer time span, which we call “Eubie Blake effect”. A simulation on the basis of an official population forecast for Germany is used to isolate the effect of demographic ageing on real per-capita HCE over the coming decades. We find that, while falling mortality rates as such lower HCE, this effect is more than compensated by an increase in remaining life expectancy so that the net effect of ageing on HCE over time is clearly positive.

A duration analysis of the effects of tuition fees for long term students in Germany

Summary We examine the impact of tuition fees for long-term students at the University of Konstanz. Applying duration analysis to examine how tuition fees influence when and how students finish their studies in six different majors, we find significant effects with respect to the hazard rates of the various ways of terminating one’s studies. Furthermore, we analyze how the probability of terminating one’s studies in a certain period of time changes. Students obtain a degree in a shorter period of time in two majors. In three other majors, however, we observe that the probability of obtaining a degree generally decreased.

Identifying Laffer Bounds: A Sufficient‐Statistics Approach with an Application to Germany

We derive a simple sufficient‐statistics test for whether a nonlinear tax‐transfer system is second‐best Pareto efficient. If it is not, then it is beyond the top of the Laffer curve and there exists a tax cut that is self‐financing. The test depends on the income distribution, extensive and intensive labor supply elasticities, and income effect parameters. A tax‐transfer system is likely to be inefficient if marginal tax rates are quickly falling in income. We apply this test to the German tax‐transfer system, and we find that the structure of effective marginal tax rates is likely to be inefficient in the region where transfers are phased out.