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Estimation of the determinants of household health care expenditures in Nepal with controls for endogenous illness and provider choice

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  • Jeffrey J. Rous

    (Department of Economics, University of North Texas, USA)

  • David R. Hotchkiss

    (School of Public Health and Tropical Medicine, Department of International Health and Development, Tulane University, New Orleans, Louisiana, USA)

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    Abstract

    This paper uses the Nepal Living Standards Survey, a nationally representative sample of households from 1996, to investigate the determinants of household out-of-pocket health expenditures. The analysis uses a multi-equation joint estimation to control for endogeneity of sickness and provider choice. The results of this analysis indicate several interesting findings. First, common unobserved factors were found to be statistically significant determinants of illness, choice of provider, and health expenditures, and may cause bias to parameter estimates if not controlled. Second, the income elasticity is estimated to be 1.10, with income having both a direct effect on health expenditure, and an indirect effect through likelihood of illness and the type of provider that is chosen. Third, housing and sanitary conditions were found to have a substantial effect on illness, and as a result, out-of-pocket health care expenditures. Fourth, despite the fact that urban, ill individuals who seek care are more likely to utilize care in more expensive settings, average health care expenditure among the urban sample was found to be substantially lower than among the rural sample, partly due to a lower likelihood of reporting illnesses and injuries and of using any type of health care provider. Copyright © 2002 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.727
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 12 (2003)
    Issue (Month): 6 ()
    Pages: 431-451

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    Handle: RePEc:wly:hlthec:v:12:y:2003:i:6:p:431-451

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

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    1. Peter A. Berman, 1997. "National Health Accounts in Developing Countries: Appropriate Methods and Recent Applications," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 6(1), pages 11-30.
    2. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
    3. Manning, W. G. & Duan, N. & Rogers, W. H., 1987. "Monte Carlo evidence on the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, Elsevier, vol. 35(1), pages 59-82, May.
    4. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, Econometric Society, vol. 52(2), pages 271-320, March.
    5. John Akin & Jeffrey Rous, 1997. "Effect of provider characteristics on choice of contraceptive provider: A two-equation full-information maximum-likelihood estimation," Demography, Springer, Springer, vol. 34(4), pages 513-523, November.
    6. Getzen, Thomas E., 2000. "Health care is an individual necessity and a national luxury: applying multilevel decision models to the analysis of health care expenditures," Journal of Health Economics, Elsevier, Elsevier, vol. 19(2), pages 259-270, March.
    7. Parker, Susan W. & Wong, Rebeca, 1997. "Household income and health care expenditures in Mexico," Health Policy, Elsevier, Elsevier, vol. 40(3), pages 237-255, June.
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    Cited by:
    1. Tin Su & Steffen Flessa, 2013. "Determinants of household direct and indirect costs: an insight for health-seeking behaviour in Burkina Faso," The European Journal of Health Economics, Springer, Springer, vol. 14(1), pages 75-84, February.
    2. Rama Joglekar, 2008. "Can insurance reduce catastrophic out-of-pocket health expenditure?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-016, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Qian, Dongfu & Lucas, Henry & Chen, Jiaying & Xu, Ling & Zhang, Yaoguang, 2010. "Determinants of the use of different types of health care provider in urban China: A tracer illness study of URTI," Health Policy, Elsevier, Elsevier, vol. 98(2-3), pages 227-235, December.
    4. Abay Asfaw & Francesca Lamanna & Stephan Klasen, 2010. "Gender gap in parents' financing strategy for hospitalization of their children: evidence from India," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(3), pages 265-279.
    5. Pokhrel, Subhash & Snow, Rachel & Dong, Hengjin & Hidayat, Budi & Flessa, Steffen & Sauerborn, Rainer, 2005. "Gender role and child health care utilization in Nepal," Health Policy, Elsevier, Elsevier, vol. 74(1), pages 100-109, September.

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