Faculty of Business and Law

Academic Year: 2022/2023

End of Teaching Block 2

Module Leader: Damian Whittard

Module Code UMED94-15-3

Module Title: Applied Economics

Examination Duration: 24 hours

Examination opens: 16 May 2023, 14:30

Submission Deadline: 17 May 2023, 14:30

ONLINE EXAM

Instructions to Students:

Students must answer ONE question from Section A AND ONE question from Section B.

Each question is equally weighted and will contribute 50% of the overall mark

Each question carries a maximum of 50 marks

where questions are broken down into sub-sections, the maximum mark for each sub-section will be shown

As is usual for an exam, for this assessment you are not expected to include full referencing, but are encouraged to cite the sources of key theories, models, case studies, sources of information etc.

This is an individual assessment: do not copy and paste work from any other source or work with any other person during this exam. Text-matching software will be used on all submissions.

There is a maximum word count of 1,000 words for each question (2,000 words in total). There is no +/- 10% on word count and anything after the maximum word count will not be marked, in line with UWE’s Word Count Policy.

Formatting

Please use the following file format(s) – Word or pdf. We cannot ensure that other formats are compatible with markers’ software and cannot guarantee to mark incorrect formats.

Please include the module name and number and your student number (not your name).

Please indicate clearly which questions you are answering.

Instructions for submission

You must submit your assignment before the stated deadline by electronic submission through Moodle.

It is your responsibility to submit the exam in a format stipulated above

Your marks may be affected if your tutor cannot open or properly view your submission.

Do not leave submission to the very last minute. Always allow time in case of technical issues.

The date and time of your submission is taken from the Moolde server and is recorded when your submission is complete, not when you click Submit.

It is essential that you check that you have submitted the correct file(s).

There is no late submission permitted on this timed assessment.

Section A:

a) Provide a critique of the system of national accounts and their usefulness in informing economic policy. In order to do so you should consider how the national account framework links with economic theory and concepts, and why national accounts can be problematic in providing reliable evidence to inform economic policy.

(20 marks)

b) You are an economic adviser to the Government on issues in relation to macroeconomic policy. Following the conflict in Ukraine and the political and humanitarian dimensions of the crisis that have followed on from the Russian invasion, you have been asked to provide economic advice, purely based on the likely macroeconomic impacts. As such, one such model (National Institute Global Econometric Model – NiGEM) estimates the likely effects to be as follows:

Evaluate the strength of the evidence and then consider the advice you would provide. Any advice given should be supported with direct reference to economic theory and models (e.g. circular flow of income, Aggregate Demand/ Aggregate Supply etc.).

In your response you should clearly detail the relationship between the economic policy objective you are attempting to affect and the instrument chosen. You should outline why you choose the specific instrument(s) and what you expect the initial effect to be. You should also consider the interdependencies of your policy choices with other macroeconomic objectives and instruments. As such, you should consider the potential indirect macroeconomic effects your policy choice could have in the medium and long-term.

(30 marks)

(Total 50 marks)

a) With reference to the academic debate regarding the ‘’Easterlin Paradox’, critically assess the suggestion that increases in economic well-being are not necessarily associated with increases in personal well-being?

(25 marks)

b) When commenting on the New Economics Foundation’s report on the National Accounts of Well-being, Professor Lord Richard Layard stated:

“If policy-makers are to make well-being a central objective they have to have ways of measuring it. [The report] represents a valuable contribution to the search for a common system of measurement which could be widely used to change the basis on which policy is made.” (NEF, 2008)

In support of this objective, the Office for National Statistics have collected data on personal (subject) well-being since 2011. Therefore, with reference to their personal well-being indicators below, discuss whether policy makers should use this data to inform policy and what types of interventions could be pursued.

You should suggest interventions for one of the four indicators and describe the mechanism through which this may work. With reference to economic models (as appropriate) you may also wish to consider, the interaction between interventions on improving personal well-being and improving economic well-being.

Figure1: Average (mean personal well-being ratings, UK, year ending March 2012 to March 2022

(25 marks)

(Total 50 marks)

Section B:

3. a) What are the specific problems associated with private health insurance markets? Outline the problems that undermine the potential for private health insurance markets to equitably fund healthcare provision.

(25 marks)

b) Based on this description of private health insurance as set up in the Netherlands (see extract below), outline how this system mitigates some of the problems typically associated with private health insurance that you have outlined in the first part of your answer.

Extract from https://www.commonwealthfund.org/international-health-policy-center/countries/netherlands [URL correct as of January 2023]

Organization of Health System in Netherlands

Role of public health insurance: In 2016, the Netherlands spent 10.5 percent of its GDP (Gross Domestic Product) on health care, and 81 percent of spending was collectively financed through a combination of earmarked payroll taxes paid by employers (46%), general taxation (22%), insurance premiums paid by individuals (21%), and co-payments (11%).

Statutory health insurance is financed partially through a nationally defined annual income tax at 6.9 percent of income up to EUR 54,614 (USD 69,989). Income tax accounts for 45 percent of funding. Insurance premiums for individuals, which are determined separately by each insurer, account for another 45 percent of funding. Each insurer sets a premium that applies to all its enrolees, regardless of their age or health status. However, through employer collectives, lower premiums may be offered.

A government grant for children and adolescents under age 18 provides the remaining 5 percent of financing.

Income taxes and government grants are collected in a central health insurance fund and redistributed among insurers in accordance with a risk-adjusted capitation formula that considers age, gender, labour force status, region, and health risk (based mostly on past drug and hospital utilization).

Private, statutory insurers are expected to engage in strategic purchasing, and contracted providers are expected to compete on both quality and cost. There were 10 statutory insurers in 2018, but the insurance market is dominated by the four largest insurance conglomerates, which account for 90 percent of all enrolees. Currently, all insurers are mandated to operate as non-profits.

Role of private health insurance: In addition to statutory coverage, most of the population (84%) purchases supplementary voluntary insurance covering a range of services not covered by statutory insurance, such as dental care, alternative medicine, physiotherapy, eyeglasses and lenses, and contraceptives, while also reducing co-payments for non-formulary medicines.

Premiums for voluntary insurance are not regulated; insurers are allowed to screen applicants for risk factors. All the insured purchase their voluntary benefits from the same (mostly non-profit) insurer that provides their statutory health insurance.

People with voluntary coverage do not receive faster access to any type of care, nor do they have increased choice among specialists or hospitals. In 2016, voluntary insurance accounted for 7 percent of total health spending.

Some treatments, such as general physiotherapy, are only partially covered for some people with specific chronic conditions. Some elective procedures are excluded, such as cosmetic plastic surgery without a medical indication, dental care after age 18, and vision care without medical indication. A range of medical devices are covered, including hearing aids and orthopaedic shoes, but wheelchairs and other walking aids are excluded.

Prevention and social supports are not covered by statutory health insurance but are financed through general taxation. The Public Health Act describes municipal responsibilities for national prevention programs, vaccinations, and infectious disease management. Municipalities can install additional prevention programs, such as healthy living and obesity reduction programs, but the provision of such services can vary widely from one municipality to another.

Cost-sharing and out-of-pocket spending: In the statutory health insurance system, the main form of cost-sharing is a mandatory deductible, which was EUR 385 (USD 493) in 2019. In addition, consumers may pay a voluntary deductible of EUR 500 (USD 641), on top of the mandatory deductible, in exchange for a lower monthly premium. People pay the full cost of specialty and hospital care up to the deductible. The deductible covers a broad range of services, including hospital admissions, specialist services, and prescription drugs. GP care, preventive services (including most immunizations and breast cancer screenings), and children’s health care are provided for free.

Co-payments, coinsurance, or direct payments may be required even after the deductible is met for some selected services, such as non-formulary medications, physiotherapy for adults, medical transportation, and medical devices. In addition, patients with restricted network plans who visit providers that do not have contracts with the insurer may be required to pay up to 25 percent of the cost of that out-of-network care.

Safety nets: In addition to providing free primary and paediatric care, the government offers means-tested subsidies (health care allowances) to help cover insurance premiums for low-income people. As of 2019, singles must have annual incomes under EUR 29,500 (USD 37,805), and households must have incomes under EUR 38,000 (USD 48,698).

More than 5 million people (approximately 30% of the population) receive these allowances,9 which are set on a sliding, income-based scale, up to a maximum of EUR 99 (USD 127) per month for singles and EUR 192 (USD 246) per month for households.

(25 marks)

(Total 50 marks)

4. a) Are markets efficient allocation mechanisms for healthcare spending? Make use of micro-economic theory to outline your answer.

(25 marks)

b) Analyse the potential for market-based allocation mechanisms for the following two healthcare spending decisions: a. the provision of laundry services; b. the provision of cancer treatment services. Compare and contrast the capacity for market-based allocation mechanisms to appropriately allocate resources in these two aspects of healthcare.

(25 marks)

(Total 50 marks)

END OF QUESTION PAPER

Please use this answer booklet to write your answers

Villa College

FINAL EXAMINATION

UWE student ID

Program	Intake

VC Student ID Number
Learning Centre
Module Code
Module Name
Examination Date	Session	(Morning/Afternoon/Night)
Examination Venue

Answer booklet