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Do red herrings swim in circles? Controlling for the endogeneity of time to death

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  • Felder, Stefan
  • Werblow, Andreas
  • Zweifel, Peter

Abstract

Studies on the effect of ageing on health care expenditure (HCE) have revealed the importance of controlling for time-to-death (TTD). These studies, however, are subject to possible endogeneity if HCE influences the remaining life expectancy. This paper introduces a 10-year observation period on monthly HCE, socioeconomic characteristics and survivor status to first predict TTD and then use the predicted values as an instrument in the regression for HCE. While exogeneity of TTD has to be rejected, core results concerning the role of TTD rather than age as a determinant of HCE (the 'red herring' hypothesis) are confirmed.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 29 (2010)
Issue (Month): 2 (March)
Pages: 205-212

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Handle: RePEc:eee:jhecon:v:29:y:2010:i:2:p:205-212

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Web page: http://www.elsevier.com/locate/inca/505560

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Keywords: Health care expenditure Proximity to death Ageing 'Red herring' hypothesis;

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References

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  1. Robert E Hall & Charles I Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 39-72, 02.
  2. Martin Schellhorn & Andreas E. Stuck & Christoph E. Minder & John C. Beck, 2000. "Health services utilization of elderly Swiss: evidence from panel data," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 533-545.
  3. Kevin M. Murphy & Robert H. Topel, 2006. "The Value of Health and Longevity," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 871-904, October.
  4. Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
  5. Christian Salas & James P. Raftery, 2001. "Econometric issues in testing the age neutrality of health care expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 10(7), pages 669-671.
  6. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  7. 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.
  8. Felder, Stefan & Meier, Markus & Schmitt, Horst, 2000. "Health care expenditure in the last months of life," Journal of Health Economics, Elsevier, vol. 19(5), pages 679-695, September.
  9. Meena Seshamani & Alastair Gray, 2004. "Ageing and health-care expenditure: the red herring argument revisited," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 303-314.
  10. Dov Chernichovsky & Sara Markowitz, 2004. "Aging and aggregate costs of medical care: conceptual and policy issues," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 543-562.
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Cited by:
  1. Stefan Felder, 2013. "The Impact of Demographic Change on Healthcare Expenditure," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 03-06, 04.
  2. Karlsson, Martin & Klohn, Florian, 2011. "Some notes on how to catch a red herring - Ageing, time-to-death and care costs for older people in Sweden," HERO On line Working Paper Series 2011:6, Oslo University, Health Economics Research Programme.
  3. Martin Karlsson & Florian Klohn, 2014. "Testing the red herring hypothesis on an aggregated level: ageing, time-to-death and care costs for older people in Sweden," The European Journal of Health Economics, Springer, vol. 15(5), pages 533-551, June.
  4. Peter Zweifel, 2013. "The Grossman model after 40 years: response to Robert Kaestner," The European Journal of Health Economics, Springer, vol. 14(2), pages 361-362, April.
  5. Melberg, Hans Olav & Sørensen, Jan, 2013. "How does end of life costs and increases in life expectancy affect projections of future hospital spending?," HERO On line Working Paper Series 2013:9, Oslo University, Health Economics Research Programme.
  6. Karlsson, Martin & Klohn, Florian, 2011. "Some notes on how to catch a red herring Ageing, time-to-death & care costs for older people in Sweden," Darmstadt Discussion Papers in Economics 57663, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  7. de Meijer, Claudine & Koopmanschap, Marc & d' Uva, Teresa Bago & van Doorslaer, Eddy, 2011. "Determinants of long-term care spending: Age, time to death or disability?," Journal of Health Economics, Elsevier, vol. 30(2), pages 425-438, March.
  8. Vincenzo Atella & Valentina Conti, 2013. "The effect of age and time to death on health care expenditures: the Italian experience," CEIS Research Paper 267, Tor Vergata University, CEIS, revised 12 Nov 2013.

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