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Re-visiting the health care luxury good hypothesis: aggregation, precision, and publication biases?

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  • Joan Costa-i-Font
  • Marin Gemmill
  • Gloria Rubert

Abstract

While a growing literature examining the relationship between income and health expenditures suggests that health care is a luxury good, this conclusion is contentiously debated due to heterogeneity of the existing results. This paper tests the luxury good hypothesis (namely that income elasticity exceed unity) using meta-regression analysis, taking into consideration publication selection and aggregation bias. The findings suggest that publication bias exists, a result that is robust to the meta-regression model employed. Publication selection and aggregation bias also appear to play a role in the generation of estimates. The corrected income elasticity estimates range from 0.4 to 0.8, which cast serious doubt on the validity of luxury good hypothesis. Nonetheless, due to the importance of aggregation, we cannot reject the luxury good hypothesis for aggregate time series data.

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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 25303.

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Length: 31 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:ehl:lserod:25303

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Cited by:
  1. T.D. Stanley & Stephen B. Jarrell & Hristos Doucouliagos, 2009. "Could It Be Better to Discard 90% of the Data? A Statistical Paradox," Economics Series 2009_13, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  2. Benjamin Ho & Sita N. Slavov, 2012. "An alternative perspective on health inequality," Economics Bulletin, AccessEcon, vol. 32(4), pages 3182-3196.
  3. David Prieto & Santiago Lago-Peñas, 2012. "Decomposing the determinants of health care expenditure: the case of Spain," The European Journal of Health Economics, Springer, Springer, vol. 13(1), pages 19-27, February.

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