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Does disaggregation affect the relationship between health care expenditure and GDP? An analysis using regime shifts

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Author Info
Anurag Sharma () (Centre for Health Economics, Monash University)
Preety Ramful () (Centre for Health Economics, Monash University)

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Abstract

This paper investigates the impact of policy shifts on disaggregated health expenditure- GDP relationship for Australia and the USA. In contrast to previous studies the disaggregation is at the level of type of service delivered and not at the level of source of expenditure. Our results show that the subcomponents of health expenditure exhibit different patterns of behaviour at both cointegration and unit root stages once policy shifts or structural breaks, such as the introduction of a publically funded medicare policy in the USA, are allowed in the empirical analysis. When the possibility of structural break is allowed we find a significant long run relationship between subcomponents of aggregate health expenditure and GDP that is not found when no break is considered. The underlying reasons for the occurrence of breaks and policy lessons are discussed subsequently..

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File URL: http://www.buseco.monash.edu.au/centres/che/pubs/rp027.pdf
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Paper provided by Monash University, Centre for Health Economics in its series Centre for Health Economics Research Papers with number 27/08.

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Length: 20 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:mhe:cherps:2008-27

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Postal: Centre for Health Economics, Monash University, Building 75, Clayton, Victoria 3800, Australia
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  1. Raghbendra Jha & Anurag Sharma, 2001. "Structural Breaks and Unit Roots: A Further Test of the Sustainability of the Indian Fiscal Deficit," ASARC Working Papers 2001-08, Australian National University, Australia South Asia Research Centre. [Downloadable!]
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  5. Clemente, Jesus & Marcuello, Carmen & Montanes, Antonio & Pueyo, Fernando, 2004. "On the international stability of health care expenditure functions: are government and private functions similar?," Journal of Health Economics, Elsevier, vol. 23(3), pages 589-613, May. [Downloadable!] (restricted)
  6. Narayan, Paresh Kumar, 2006. "Examining structural breaks and growth rates in international health expenditures," Journal of Health Economics, Elsevier, vol. 25(5), pages 877-890, September. [Downloadable!] (restricted)
  7. Paresh Kumar Narayan, 2005. "The structure of tourist expenditure in Fiji: evidence from unit root structural break tests," Applied Economics, Taylor and Francis Journals, vol. 37(10), pages 1157-1161, June. [Downloadable!] (restricted)
  8. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May. [Downloadable!] (restricted)
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  10. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January. [Downloadable!] (restricted)
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  11. Carrion-i-Silvestre, Josep Lluis, 2005. "Health care expenditure and GDP: Are they broken stationary?," Journal of Health Economics, Elsevier, vol. 24(5), pages 839-854, September. [Downloadable!] (restricted)
  12. Paresh Kumar Narayan & Seema Narayan, 2008. "The role of permanent and transitory shocks in explaining international health expenditures," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1171-1186. [Downloadable!]
  13. Jewell, Todd & Lee, Junsoo & Tieslau, Margie & Strazicich, Mark C., 2003. "Stationarity of health expenditures and GDP: evidence from panel unit root tests with heterogeneous structural breaks," Journal of Health Economics, Elsevier, vol. 22(2), pages 313-323, March. [Downloadable!] (restricted)
  14. Okunade, Albert A. & Murthy, Vasudeva N. R., 2002. "Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture," Journal of Health Economics, Elsevier, vol. 21(1), pages 147-159, January. [Downloadable!] (restricted)
  15. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-70, October.
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