Number:
1278
Published:
Classification JEL:
E10, E62, E26, F41
Keywords:
General Equilibrium; Heterogeneous Agents; Taxes; Government Expenditure
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The most recent
Camilo Gómez, Daniela Rodriguez-Novoa
Luis E. Arango, Luz Adriana Flórez, N. Johana Marín, Carlos Esteban Posada
Bulent Guler, Yasin Kursat Onder, Mauricio Villamizar-Villegas, Jose Villegas
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.