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The determinants of health care expenditure: testing pooling restrictions in small samples

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Author Info
Helmut Herwartz (Institute of Statistics and Econometrics, Humboldt University Berlin, Germany)
Bernd Theilen (Department of Economics, Rovira i Virgili University, Spain)
Abstract

Health care expenditure has increased substantially in all Western industrialized countries in the last decades. The necessity to contain the increase in health care expenditure has motivated the analysis of its determinants to explain differences across countries and health systems. However, recent studies have questioned the use of cross section data arguing that health systems are too different to allow for such comparisons. In this paper we investigate whether this criticism is really justified. We analyze the variations of health care expenditure in OECD countries relative to income, population aging and technological change. Our analysis is based on pooled cross section data and time series. Firstly, formulating error correction models for individual countries we demonstrate that in almost all cases the investigated variables are cointegrated. Secondly, we use a bootstrap framework for inference and examine whether the influence of explanatory variables is unique across countries. Applying recursive estimation procedures we find evidence for cross country homogeneity during the period 1961-1979. In the last two decades health care dynamics become more and more country specific thus indicating divergence of health systems and the growing importance of country-specific effects in the explanation of differences in health care expenditure. Copyright © 2002 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.700
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 12 (2003)
Issue (Month): 2 ()
Pages: 113-124
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Handle: RePEc:wly:hlthec:v:12:y:2003:i:2:p:113-124

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  1. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August. [Downloadable!] (restricted)
  2. repec:cup:etheor:v:10:y:1994:i:1:p:95-115 is not listed on IDEAS
  3. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
    Other versions:
  4. H. Herwartz & M. Neumann, . "Bootstrap Inference in Single Equation Error Correction Models," Sonderforschungsbereich 373 2000-87, Humboldt Universitaet Berlin.
  5. McCoskey, Suzanne K. & Selden, Thomas M., 1998. "Health care expenditures and GDP: panel data unit root test results," Journal of Health Economics, Elsevier, vol. 17(3), pages 369-376, June. [Downloadable!] (restricted)
  6. Milne, R & Molana, H, 1991. "On the Effect of Income and Relative Price on Demand for Health Care: EC Evidence," Applied Economics, Taylor and Francis Journals, vol. 23(7), pages 1221-25, July.
  7. Gerdtham, Ulf-G. & Jonsson, Bengt, 1991. "Conversion factor instability in international comparisons of health care expenditure," Journal of Health Economics, Elsevier, vol. 10(2), pages 227-234, July. [Downloadable!] (restricted)
  8. Gerdtham, Ulf-G. & Lothgren, Mickael, 2000. "On stationarity and cointegration of international health expenditure and GDP," Journal of Health Economics, Elsevier, vol. 19(4), pages 461-475, July. [Downloadable!] (restricted)
  9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I. [Downloadable!] (restricted)
  10. Gerdtham, Ulf-G. & Sogaard, Jes & Andersson, Fredrik & Jonsson, Bengt, 1992. "An econometric analysis of health care expenditure: A cross-section study of the OECD countries," Journal of Health Economics, Elsevier, vol. 11(1), pages 63-84, May. [Downloadable!] (restricted)
  11. Parkin, David & McGuire, Alistair & Yule, Brian, 1987. "Aggregate health care expenditures and national income : Is health care a luxury good?," Journal of Health Economics, Elsevier, vol. 6(2), pages 109-127, June. [Downloadable!] (restricted)
  12. Hitiris, Theo, 1997. "Health Care Expenditure and Integration in the Countries of the European Union," Applied Economics, Taylor and Francis Journals, vol. 29(1), pages 1-6, January. [Downloadable!] (restricted)
  13. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March. [Downloadable!]
  14. Hansen, Paul & King, Alan, 1996. "The determinants of health care expenditure: A cointegration approach," Journal of Health Economics, Elsevier, vol. 15(1), pages 127-137, February. [Downloadable!] (restricted)
  15. Blomqvist, A. G. & Carter, R. A. L., 1997. "Is health care really a luxury?," Journal of Health Economics, Elsevier, vol. 16(2), pages 207-229, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jochen Hartwig, 2006. "What Drives Health Care Expenditure? Baumol’s Model of ‘Unbalanced Growth’ Revisited," KOF Working papers 06-133, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
    Other versions:
  2. Costa-Font, J & Gemmill, M & Rubert, G, 2009. "Re-visiting the Health Care Luxury Good Hypothesis: Aggregation, Precision, and Publication Biases?," Health, Econometrics and Data Group (HEDG) Working Papers 09/02, HEDG, c/o Department of Economics, University of York. [Downloadable!]
    Other versions:
  3. Paresh Kumar Narayan & Seema Narayan, 2008. "The role of permanent and transitory shocks in explaining international health expenditures," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1171-1186. [Downloadable!]
  4. Bordignon, Massimo & Turati, Gilberto, 2003. "Bailing Out Expectations and Health Expenditure in Italy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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