Geographical Variance and Convergence of Health, Medical Cost, Social Common Capital in Japan

Abstract

This study investigates the relationship between health, medical cost, and social common capital in Japan with focusing on geographical variance and convergence. There is a well-known paradox of geographical variances in medical cost per person across regions at 47 prefecture levels. The ratio of the highest and the lowest medical cost for the "impatient general population" has been 2 to 1. Existing literatures on Japanese geographical variance utilize individual patient record for health insurance purpose, and mostly analyze using the framework of the "physician induced demand". Their results are mixed about its existence. Our research differs from existing studies in several respects. First, this study focuses on the role of "health-related social common capital (HR-SCC)" as in Uzawa(2005). This capital is assumed to be accumulated collectively by society without profit-making objective, and controlled by the government. We analyze the variance of medical cost caused by the different stage of accumulation of HR-SCC. Second, this study focuses on social factors such as income inequality, education, human bondage, or family style as determinants of health. Third, in addition to life expectancy, we analyze health status by suicide rates, crime rates, and people sentiments of each region. We obtain the following results. First, higher medical cost is explained by higher endowment of HR-SCC. This result confirms the existence of "supplier induced demand." We also find that medical cost converges into each steady state level depending on regions in conditional sense instead of in absolute sense. Because of the slow convergence, differences persisted. This convergence is made through the process of HR-SCC whose level differ significantly across regions. When the government adopts "managed care style" cost containment policy, it should utilize information on speed of convergence of medical cost for each prefecture.

Keywords: medical cost, social common capital, convergence

JEL Classification: l11, l12