Paying the Price: Accounting for Health Status and Expenditures across Country ∗ Raquel Fonseca † Francois Langot ‡ Pierre-Carl Michaud § Thepthida Sopraseuth ¶ This version: October 2018 Abstract In this paper, we quantify the contributions of prices to explain cross-country differences in the health expenditure as a share of GDP and health status. To this end, we extend a general equilibrium framework à la Aiyagari (1994) by including health production Grossman (1972). The model relies on two wedges to explain health expenditures as a share of GDP and health status: (i) TFP wedge measuring the relative economic development, and (ii) health services wedge capturing the inefficiencies on the health service market. We estimate structural parameters as well as the country-specific structural wedges using a method of simulated moments approach on aggregate and micro data from eight countries. We find that dispersion in health prices seems to be the main cause for cross-country differences in health. These price differences come from inefficiencies in the health services sector and have sizable effect on welfare. * Corresponding Author: Raquel Fonseca, Departement des sciences economiques 315, rue Ste- Catherine Est, Montreal, (QC), Canada H2X 3X2. fonseca.raquel@uqam.ca. We would like to thank Eric French and Pascal St-Amour for helpful comments. This research was supported by the National Institute on Aging, under grant R01AG030824, PANORisk Regional grant (Pays de la Loire, France), and the Institut Universitaire de France. Errors are our own. † ESG-Université du Quebec à Montreal, CIRANO & RAND ‡ Le Mans University (GAINS-TEPP) & Paris School of Economics & Cepremap & IZA § HEC Montreal & NBER ¶ University of Cergy-Pontoise, THEMA 1