Borradores de Economia
Number:
1278
Published:
Classification JEL:
E10, E62, E26, F41
Keywords:
General Equilibrium; Heterogeneous Agents; Taxes; Government Expenditure
The most recent
Leonardo Fabio Morales, Leonardo Bonilla-Mejía, Didier Hermida-Giraldo, Francisco Javier Lasso-Valderrama, José Pulido
Constanza Martínez-Ventura, Ligia Alba Melo-Becerra
Leonardo Fabio Morales, Juan Chaparro-Cardona, Eleonora Dávalos, Nataly Corredor-Martinez
Abstract
Healthcare expenditure in Colombia is expected to increase by 35% over the next eight years, due to population aging, rising costs, and domestic policies. These trends, in a context of high levels of informality and affiliation to the subsidized regime, add significant pressure to public finances. Using a dynamic general equilibrium model with heterogeneous households, we analyze the macroeconomic impact of financing a higher public healthcare expenditure through different taxes. The funding sources play a significant role in shaping the aggregate dynamics and income inequality. While consumption taxes are the best option in terms of output, financing with taxes on high-skilled labor improves income distribution.