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Does public spending level mortality inequalities? – Findings from East Germany after unification Fanny Kluge and Tobias...

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Does public spending level mortality inequalities? – Findings from East Germany after unification Fanny Kluge and Tobias Vogt Max Planck Institute for Demographic Research, Rostock, Germany and University of Rostock, Germany

NTA Global Meeting 03.06.2013

Kluge and Vogt

Public spending and mortality

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Background

Motivation

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In the literature: social inequalities are a major cause for mortality differentials.

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The larger socioeconomic inequality the wider life expectancy differentials.

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Mortality differentials should narrow if social inequalities diminish among or within countries.

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Background

Motivation

I

In the literature: social inequalities are a major cause for mortality differentials.

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The larger socioeconomic inequality the wider life expectancy differentials.

I

Mortality differentials should narrow if social inequalities diminish among or within countries.

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Can public policy contribute to a leveling of mortality differentials?

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Background

The German reunification - a natural experiment

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Fall of Berlin Wall →

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Background

The German reunification - a natural experiment

I

Fall of Berlin Wall → Reunification after 40 years of separation and antagonistic political, social and economic ’treatments’ for a population sharing the same cultural and historic background.

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Background

The German reunification - a natural experiment

I

I

Fall of Berlin Wall → Reunification after 40 years of separation and antagonistic political, social and economic ’treatments’ for a population sharing the same cultural and historic background. What did the reunification mean for the East?

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Background

The German reunification - a natural experiment

I

I

Fall of Berlin Wall → Reunification after 40 years of separation and antagonistic political, social and economic ’treatments’ for a population sharing the same cultural and historic background. What did the reunification mean for the East? I

Introduction of the West German social security system including access to modern health care.

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Background

The German reunification - a natural experiment

I

I

Fall of Berlin Wall → Reunification after 40 years of separation and antagonistic political, social and economic ’treatments’ for a population sharing the same cultural and historic background. What did the reunification mean for the East? I

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Introduction of the West German social security system including access to modern health care. Increase in relative and nominal income due to introduction of West German Mark at a highly beneficial exchange rate of 1:1.

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Background

Life expectancy and unification West Germany

Females

Males 79

unification

78 77 76 75 74 73 72 71 70 69 68 67 66 65

71

72

73

74

75

76

77

78

79

80

81

82

unification

83

84

seq(1, 10)

70

Life Expectancy at Birth

East Germany

1956

1969

1982

1995

2008

1956

1969

1982

1995

2008

Years

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Background

Mortality improvements by age group

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Background

Research Question

Which impact did public spending have on the mortality convergence and how elastic is mortality to public spending? I

variety of factors changed after unification (pollution, life style factors etc.)

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but limitation on public expenditures for pensions and health care (Diehl 2004)

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Data and Methods

Data and Methodology Data I National Transfer Accounts for East and West Germany. I

Causes of Death Statistics Germany.

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Data and Methods

Data and Methodology Data I National Transfer Accounts for East and West Germany. I

Causes of Death Statistics Germany.

Modeling the impact of public spending on mortality I

Difference-in-difference estimation to estimate the elasticity of mortality to public spending

I

Generalized linear model with Poisson-distributed mortality hazard to quantify the impact of different categories of public spending

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Results

Life expectancy and public pensions

400

600

800

Average West Average East

200

per capita in Euro

1000

Average Monthly Pension East vs West

1975

1985

1995

2005

Calendar Years

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Results

Life expectancy and health expenditures

70

1000

72

74 Life Expectancy at birth

2500 2000 1500

Health Expenditures East Health Expenditures West Life Expectancy East Life Expectancy West

500

per capita in Euro

76

3000

Unification

78

3500

Life Expectancy vs. Health Expenditures

1980

1985

1990

1995

2000

Calendar Years

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Results

East/West expenditure ratios Both Sexes 1:1 Both Sexes 5:1

Females Males

Average Pensions

Health Expenditures Per Capita 10 8 4

6

10

2

5 0

West/East Ratios

15

seq(1, 10)

1980 1984 1988 1992 1996 2000

1980 1984 1988 1992 1996 2000

Calendar Years

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Results

A simple diff-in-diff approach Without Unification

seq(1, 10)

unification

3700 1900

2800

per capita in Euros

4600

5500

unification

80 79 78 77 76 75 74 73 72

1000

71 70

Years at Birth

Total Social Expenditures 6400

Life Expectancy

Unification

1980

1986

1992

1998

1980

Kluge and Vogt

1986

1992

1998

Public spending and mortality

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Results

A simple diff-in-diff approach Without Unification

unification

3700

per capita in Euros

72

1900

2800

77 76 75 74 73

4600

5500

unification

80

Total Social Expenditures

1000

71 70

Years at Birth

78

79

Red: real observed values

seq(1, 10)

6400

Life Expectancy

Unification

1980

1986

1992

1998

1980

1986

1992

1998

Results

A simple diff-in-diff approach Without Unification

unification

3700

per capita in Euros

72

1900

2800

77 76 75 74 73

4600

5500

unification

80

Total Social Expenditures

1000

71 70

Lee-Carter-Forecast

Years at Birth

78

79

Red: real observed values

seq(1, 10)

6400

Life Expectancy

Unification

1980

1986

1992

1998

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1980

1986

1992

1998

Public spending and mortality

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Results

A simple diff-in-diff approach

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∆ life expectancy: 1.8 years

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∆ public spending: 4,500 e

1 e invested in pensions or health care yields 3 hours life expectancy per year.

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Results

A simple diff-in-diff approach

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∆ life expectancy: 1.8 years

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∆ public spending: 4,500 e

1 e invested in pensions or health care yields 3 hours life expectancy per year.

Other factors changed: pollution, nutrition, health behaviour, life style factors, etc. → GLM for different causes of death.

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Results

The regression model

log(mxj,t ) = αj,t + β Xj,t + εj,t

(Intercept) Pensions Health Age Sex

Estimate

Std. Error

t value

Pr(>|t|)

-9.960e+00 -2.698e-02 -3.728e-02 1.018e-01 -3.419e-01

9.853e-02 5.222e-06 8.088e-06 1.263e-03 2.555e-02

-101.086 -5.166 -4.610 80.579 -13.379

< 2e-16 *** 2.51e-07 *** 4.16e-06 *** < 2e-16 *** < 2e-16 ***

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Results

All-cause mortality All Cause Mortality

All cause mortality

(Intercept) Pensions Health Age Region Sex Unific

Ages above 60 Germany Estimate Std. Error -1,07E-001 4,23E-002 -5,46E-006 1,17E-006 -3,50E-005 2,94E-006 1,09E-001 4,98E-004 -1,06E-001 6,40E-003 -3,47E-001 5,85E-003 -1,08E-001 9,40E-003

P-value <2E-016 3,26E-006 <2E-016 <2E-016 <2E-016 <2E-016 <2E-016

Ages above 60 East Germany Estimate Std. Error P-value -1,05E-001 5,07E-002 <2E-016 -1,90E-005 1,76E-006 <2E-016 -4,95E-005 4,80E-006 <2E-016 1,08E-001 6,09E-004 <2E-016 -3,10E-001 7,02E-003 <2E-016 -3,58E-003 1,94E-002 0,854

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Ages above 60 West Germany Estimate Std. Error P-value -1,11E-001 8,22E-002 <2E-016 3,89E-006 1,77E-006 0,02844 -1,81E-005 6,70E-006 0,00692 1,11E-001 1,12E+000 <2E-016 -3,67E-001 1,06E-002 <2E-016 -1,47E-001 1,19E-002 <2E-016

Results

All-cause mortality All Cause Mortality

All cause mortality

(Intercept) Pensions Health Age Region Sex Unific

Ages above 60 Germany Estimate Std. Error -1,07E-001 4,23E-002 -5,46E-006 1,17E-006 -3,50E-005 2,94E-006 1,09E-001 4,98E-004 -1,06E-001 6,40E-003 -3,47E-001 5,85E-003 -1,08E-001 9,40E-003

P-value <2E-016 3,26E-006 <2E-016 <2E-016 <2E-016 <2E-016 <2E-016

Ages above 60 East Germany Estimate Std. Error P-value -1,05E-001 5,07E-002 <2E-016 -1,90E-005 1,76E-006 <2E-016 -4,95E-005 4,80E-006 <2E-016 1,08E-001 6,09E-004 <2E-016 -3,10E-001 7,02E-003 <2E-016 -3,58E-003 1,94E-002 0,854

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Ages above 60 West Germany Estimate Std. Error P-value -1,11E-001 8,22E-002 <2E-016 3,89E-006 1,77E-006 0,02844 -1,81E-005 6,70E-006 0,00692 1,11E-001 1,12E+000 <2E-016 -3,67E-001 1,06E-002 <2E-016 -1,47E-001 1,19E-002 <2E-016

Results

All-cause mortality All Cause Mortality

All cause mortality

(Intercept) Pensions Health Age Region Sex Unific

Ages above 60 Germany Estimate Std. Error -1,07E-001 4,23E-002 -5,46E-006 1,17E-006 -3,50E-005 2,94E-006 1,09E-001 4,98E-004 -1,06E-001 6,40E-003 -3,47E-001 5,85E-003 -1,08E-001 9,40E-003

P-value <2E-016 3,26E-006 <2E-016 <2E-016 <2E-016 <2E-016 <2E-016

Ages above 60 East Germany Estimate Std. Error P-value -1,05E-001 5,07E-002 <2E-016 -1,90E-005 1,76E-006 <2E-016 -4,95E-005 4,80E-006 <2E-016 1,08E-001 6,09E-004 <2E-016 -3,10E-001 7,02E-003 <2E-016 -3,58E-003 1,94E-002 0,854

Ages above 60 West Germany Estimate Std. Error P-value -1,11E-001 8,22E-002 <2E-016 3,89E-006 1,77E-006 0,02844 -1,81E-005 6,70E-006 0,00692 1,11E-001 1,12E+000 <2E-016 -3,67E-001 1,06E-002 <2E-016 -1,47E-001 1,19E-002 <2E-016

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Results

Health care or pensions? I

Overall: health care has a greater impact than pensions in reducing mortality but pensions are very important for the convergence of East and West Germany.

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Results

Health care or pensions? I

Overall: health care has a greater impact than pensions in reducing mortality but pensions are very important for the convergence of East and West Germany.

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Different CoD: health care expenditures most beneficial in reducing mortality from infectious diseases, followed by digestive and respiratory diseases. Pensions have greatest effect on mortality from external causes and circulatory diseases.

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Summary

Conclusion

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East Germans benefited greatly from increases in public spending.

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Mortality differentials narrowed as level of disposable income converged and access to modern health was granted.

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Indication that public spending can help to level mortality differentials via the reduction of social inequalities.

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Next Steps

Future Research

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Include lag variables.

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Focus on older age groups.

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Use the German Pension Fund data to investigate if the results hold on the individual level.

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Thank you for your attention!

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Comments and Questions are welcome.

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E-Mail: [email protected]

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