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Modelling Time-Varying Income Elasticities of Health Care Expenditure for the OECD

Author

Listed:
  • Isabel Casas

    (BCAM; and Department of Business Economics, University of Southern Denmark)

  • Jiti Gao

    (Monash University)

  • Shangyu Xie

    (University of International Business and Economics)

Abstract

Income elasticity dynamics of health expenditure is considered for the OECD and the Eurozone over the period 1995-2014. This paper studies a novel non-linear cointegration model with fixed effects, controlling for cross-section dependence and unobserved heterogeneity. Most importantly, its coefficients can vary over time and its variables can be non-stationary. The resulting asymptotic theory is fundamentally different with a faster rate of convergence to similar kernel smoothing methodologies. A fully modified kernel regression method is also proposed to reduce the asymptotic bias. Results show a steep increase in the income elasticity for the OECD and a small increase for the Eurozone.

Suggested Citation

  • Isabel Casas & Jiti Gao & Shangyu Xie, 2018. "Modelling Time-Varying Income Elasticities of Health Care Expenditure for the OECD," CREATES Research Papers 2018-29, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2018-29
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    More about this item

    Keywords

    Cross-sectional dependence; Health expenditure; Income elasticity; Nonparametric kernel smoothing; Non-stationarity; Super-consistency.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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