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Spurious correlation in estimation of the health production function: A note

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Author Info

  • Sule Akkoyunlu

    ()
    (Swiss Form for Migration and Population)

  • Frank R. Lichtenberg

    ()
    (Columbia University)

  • Boriss Siliverstovs

    ()
    (KOF Swiss Economic Institute)

  • Peter Zweifel

    ()
    (University of Zurich)

Abstract

In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be related to these two factors. Therefore, the estimates reported by Lichtenberg (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 3 ()
Pages: 2505-2514

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Handle: RePEc:ebl:ecbull:eb-10-00138

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Keywords: Health; Life expectancy; Innovation; Pharmaceuticals; Health care expenditure; Cointegration;

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References

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  1. Zeynep Or, 2001. "Exploring the Effects of Health Care on Mortality Across OECD Countries," OECD Labour Market and Social Policy Occasional Papers 46, OECD Publishing.
  2. Carrion-i-Silvestre, Josep Lluis, 2005. "Health care expenditure and GDP: Are they broken stationary?," Journal of Health Economics, Elsevier, vol. 24(5), pages 839-854, September.
  3. Frank R. Lichtenberg, 1996. "The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality," NBER Working Papers 5418, National Bureau of Economic Research, Inc.
  4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  5. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  6. Blomqvist, A.G. & Carter, R.A.L., 1993. "Is Health Care Really a Luxury?," UWO Department of Economics Working Papers 9311, University of Western Ontario, Department of Economics.
  7. Pierre-Yves Crémieux & Marie-Claude Meilleur & Pierre Ouellette & Patrick Petit & Martin Zelder & Ken Potvin, 2005. "Public and private pharmaceutical spending as determinants of health outcomes in Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 107-116.
  8. Peter Zweifel & Lukas Steinmann & Patrick Eugster, 2005. "The Sisyphus Syndrome in Health Revisited," International Journal of Health Care Finance and Economics, Springer, vol. 5(2), pages 127-145, June.
  9. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  10. Pierre-Yves Crémieux & Pierre Ouellette & Caroline Pilon, 1999. "Health care spending as determinants of health outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 627-639.
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Citations

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Cited by:
  1. Maurus Rischatsch & Maria Trottmann, 2009. "Physician dispensing and the choice between generic and brand-name drugs – Do margins affect choice?," SOI - Working Papers 0911, Socioeconomic Institute - University of Zurich.
  2. Andreas Polk & Armin Schmutzler & Adrian Muller, 2010. "Lobbying and the Power of Multinational Firms," SOI - Working Papers 1008, Socioeconomic Institute - University of Zurich.
  3. Ilja Neustadt & Peter Zweifel, 2009. "Economic Well-Being, Social Mobility, and Preferences for Income Redistribution: Evidence from a Discrete Choice Experiment," SOI - Working Papers 0909, Socioeconomic Institute - University of Zurich, revised Jan 2010.
  4. Baltagi, Badi H. & Moscone, Francesco & Tosetti, Elisa, 2011. "Medical Technology and the Production of Health Care," IZA Discussion Papers 5545, Institute for the Study of Labor (IZA).
  5. Michele Sennhauser, 2009. "Why the Linear Utility Function is a Risky Choice in Discrete-Choice Experiments," SOI - Working Papers 1014, Socioeconomic Institute - University of Zurich.
  6. Maurus Rischatsch, 2009. "Simulating WTP Values from Random-Coefficient Models," SOI - Working Papers 0912, Socioeconomic Institute - University of Zurich.

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