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The relationship between healthcare expenditure and disposable personal income in the US states: a fractional integration and cointegration analysis

Author

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  • Guglielmo Maria Caporale

    (Brunel University London)

  • Juncal Cunado

    (University of Navarra)

  • Luis A. Gil-Alana

    (University of Navarra)

  • Rangan Gupta

    (University of Pretoria)

Abstract

This study examines the relationship between healthcare expenditure and disposable income in the 50 US states over the period 1966–2009 using fractional integration and cointegration techniques. The degree of integration and nonlinearity of both series are found to vary considerably across states, while the fractional cointegration analysis suggests that a long-run relationship exists between them in only 11 out of the 50 US states. The estimated long-run income elasticity of healthcare expenditure suggests that health care is a luxury good in these states. By contrast, the short-run elasticity obtained from the regressions in first differences is in the range (0, 1) for most US states, which suggests that health care is a necessity good instead. The implications of these results for health policy are also discussed.

Suggested Citation

  • Guglielmo Maria Caporale & Juncal Cunado & Luis A. Gil-Alana & Rangan Gupta, 2018. "The relationship between healthcare expenditure and disposable personal income in the US states: a fractional integration and cointegration analysis," Empirical Economics, Springer, vol. 55(3), pages 913-935, November.
  • Handle: RePEc:spr:empeco:v:55:y:2018:i:3:d:10.1007_s00181-017-1297-3
    DOI: 10.1007/s00181-017-1297-3
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    2. Nicholas Apergis & Tsangyao Chang & Christina Christou & Rangan Gupta, 2017. "Convergence of Health Care Expenditures Across the US States: A Reconsideration," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 303-316, August.
    3. Mehdi Barati & Hadiseh Fariditavana, 2020. "Asymmetric effect of income on the US healthcare expenditure: evidence from the nonlinear autoregressive distributed lag (ARDL) approach," Empirical Economics, Springer, vol. 58(4), pages 1979-2008, April.
    4. Jesús Clemente & Angelina Lázaro-Alquézar & Antonio Montañés, 2020. "Does the Great Recession Contribute to the Convergence of Health Care Expenditures in the US States?," IJERPH, MDPI, vol. 17(2), pages 1-7, January.
    5. Murthy, Vasudeva N.R. & Okunade, Albert A., 2016. "Determinants of U.S. health expenditure: Evidence from autoregressive distributed lag (ARDL) approach to cointegration," Economic Modelling, Elsevier, vol. 59(C), pages 67-73.
    6. Nicholas Apergis & Rangan Gupta & Chi Keung Marco Lau & Zinnia Mukherjee, 2016. "An Analysis of the Relationship between U.S. State Level Carbon Dioxide Emissions and Health Care Expenditure," Working Papers 201618, University of Pretoria, Department of Economics.
    7. Mulatu F. Zerihun & Juncal Cunado & Rangan Gupta, 2017. "Are Health Care Expenditures and Personal Disposable Income Characterised by Asymmetric Behaviour? Evidence from US State-Level Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(2), pages 527-542, March.

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    More about this item

    Keywords

    Healthcare expenditure; Income elasticity; US states; Fractional integration; Fractional cointegration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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