Health Expenditure and Income in the United States
AbstractThis paper investigates the long-run economic relationship between health care expenditure and income in the US at a State level. Using a panel of 49 US States followed over the period 1980-2004, we study the non-stationarity and cointegration between health spending and income, ultimately measuring income elasticity of health care. The tests we adopt allow us to explicitly control for cross-section dependence and unobserved heterogeneity. Specifically, in our regression equations we assume that the error is the sum of a multifactor structure and a spatial autoregressive process, which capture global shocks and local spill overs in health expenditure. Our results suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in other US studies. Further, we observe a significant spatial spill over, though with a smaller intensity than that detected in other studies on spatial concentration of US health spending. Our broad perspective of cross section dependence as well as the methods used to capture it give new insights on the debate over the relationship between health spending and income.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 07/14.
Date of creation: Oct 2007
Date of revision:
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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Web page: http://www2.le.ac.uk/departments/economics
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Other versions of this item:
- F. Moscone & E. Tosetti, 2010. "Health expenditure and income in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 19(12), pages 1385-1403, December.
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
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