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Consumption expenditure on Health and Education: Econometric models and evolution of OECD countries 1970-96


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  • Guisan, M.C.


  • Arranz, M.


We analyse the evolution of Private Consumption on two special groups of expenditure: Health, and Education and Culture, having into account that there are some substitution effects between public and private expenditure on both groups. The comparison is made with data of real private expenditure by inhabitant, at 1990 prices and exchange rates, for 13 OECD countries in the period 1970-94 and with data of real public and private expenditure by inhabitant for 24 countries in the year 1996. We estimate some econometric models for private expenditure and the results confirm the existence of the substitution effect and that this effect seems to be higher in the case of Health. From the analysis of the evolution of these variable our main conclusion is that the to increase the expenditure on both groups, with economic development, is positive for welfare and obeys to a rational behaviour of consumers. So we do not agree with the propositions and attempts to cut public expenditure on these important services, which sometimes are made in the name of a kind economic efficiency that do not have into account, in the desirable degree, the quality of services and social welfare.

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Paper provided by University of Santiago de Compostela. Faculty of Economics and Business. Econometrics. in its series Economic Development with number 50.

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Length: 19 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:eaa:ecodev:50

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  1. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
  2. Arranz, M., 1996. "Forecasting Private Consumption Structure in European Countries: SKIM Model Results and Comparison with other Approaches," Faculty of Economics 04, Universidad de Santiago de Compostela, Faculty of Economics, Applied Econometric and Quantitative Studies.
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