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On the Insufficiency of Government Medical and Health Care Expenditure of China: A Stochastic Frontier Analysis Based on Provincial Panel Data

Keywords: Fiscal decentralization , insufficiency , medical and health care expenditure , stochastic frontier analysis , urbanization

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Abstract:

This study sets up a deterministic model of the optimal government medical and health care expenditure amount and then adopts the provincial panel data of China from 1999-2009 to study the insufficiency problem of government medical and health care expenditure with the help of stochastic frontier analysis (hereinafter referred as SFA) technique. Our result indicates that judging from both provincial level and national average level, although it has been alleviated during these years, there is still a huge gap between actual government expenditure and its optimal amount. We also find that the higher the degree of fiscal decentralization, the closer is the medical and health care expenditure to its optimal level. In addition, urbanization in China aggravates the insufficiency problem.

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