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

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  • 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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Bibliographic Info

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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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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Cited by:
  1. Anindya Sen, 2005. "Is Health Care a Luxury? New Evidence from OECD Data," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 5(2), pages 147-164, June.
  2. Michel Dumont & Peter Willemé, 2013. "Working Paper 02-13 - Machines that go ‘ping’: medical technology and health expenditures in OECD countries," Working Papers 1302, Federal Planning Bureau, Belgium.
  3. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter?," Munich Reprints in Economics, University of Munich, Department of Economics 19280, University of Munich, Department of Economics.
  4. Nilgun Yavuz & Veli Yilanci & Zehra Ozturk, 2013. "Is health care a luxury or a necessity or both? Evidence from Turkey," The European Journal of Health Economics, Springer, Springer, vol. 14(1), pages 5-10, February.
  5. 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, HEDG, c/o Department of Economics, University of York 09/02, HEDG, c/o Department of Economics, University of York.
  6. Tang, Chor Foon, 2010. "The determinants of health expenditure in Malaysia: A time series analysis," MPRA Paper 24356, University Library of Munich, Germany.
  7. Hartwig, Jochen, 2008. "What drives health care expenditure?--Baumol's model of 'unbalanced growth' revisited," Journal of Health Economics, Elsevier, Elsevier, vol. 27(3), pages 603-623, May.
  8. Massimo Bordignon & Gilberto Turati, 2003. "Bailing Out Expectations and Health Expenditure in Italy," CESifo Working Paper Series 1026, CESifo Group Munich.
  9. Lau, Marco Chi Keung & Fung, Ka Wai Terence, 2013. "Convergence in Health Care Expenditure of 14 EU Countries: New Evidence from Non-linear Panel Unit Root Test," MPRA Paper 52871, University Library of Munich, Germany.
  10. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, Springer, vol. 150(1), pages 155-179, January.
  11. Narayan, Paresh Kumar & Narayan, Seema, 2008. "Does environmental quality influence health expenditures? Empirical evidence from a panel of selected OECD countries," Ecological Economics, Elsevier, Elsevier, vol. 65(2), pages 367-374, April.
  12. Narayan, Paresh Kumar, 2006. "Examining structural breaks and growth rates in international health expenditures," Journal of Health Economics, Elsevier, Elsevier, vol. 25(5), pages 877-890, September.
  13. Paresh Kumar Narayan & Seema Narayan, 2008. "The role of permanent and transitory shocks in explaining international health expenditures," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 17(10), pages 1171-1186.
  14. Marwa Farag & A. NandaKumar & Stanley Wallack & Dominic Hodgkin & Gary Gaumer & Can Erbil, 2012. "The income elasticity of health care spending in developing and developed countries," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 12(2), pages 145-162, June.

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