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Health care expenditure and GDP: An international panel smooth transition approach

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  • Chakroun, Mohamed

Abstract

In this paper, we investigate the potential threshold effects in the relationship between national expenditures on health care and national income. Using a panel threshold regression model, we derive country-specific and time-specific income elasticities for 17 OECD countries over the period 1975–2003. In contrast to many previous analyses, our empirical results show that health care is a necessity rather than a luxury. Further, the relationship between health expenditure and income seems rather nonlinear, changing over time and across countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14322.

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Date of creation: May 2009
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Handle: RePEc:pra:mprapa:14322

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Keywords: Health expenditure; Income elasticity; Panel smooth threshold regression models;

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References

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  1. Jennifer Roberts, 1999. "Sensitivity of elasticity estimates for OECD health care spending: analysis of a dynamic heterogeneous data field," Health Economics, John Wiley & Sons, Ltd., vol. 8(5), pages 459-472.
  2. Parkin, David & McGuire, Alistair & Yule, Brian, 1987. "Aggregate health care expenditures and national income : Is health care a luxury good?," Journal of Health Economics, Elsevier, vol. 6(2), pages 109-127, June.
  3. Hansen, Paul & King, Alan, 1996. "The determinants of health care expenditure: A cointegration approach," Journal of Health Economics, Elsevier, vol. 15(1), pages 127-137, February.
  4. Dick van Dijk & Dennis Fok & Philip Hans Franses, 2005. "A multi-level panel STAR model for US manufacturing sectors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(6), pages 811-827.
  5. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, Elsevier, vol. 93(2), pages 345-368, December.
  6. 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.
  7. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  8. Andres Gonzalez & Timo Terasvirta & Dick van Dijk, 2005. "Panel Smooth Transition Regression Models," Research Paper Series, Quantitative Finance Research Centre, University of Technology, Sydney 165, Quantitative Finance Research Centre, University of Technology, Sydney.
  9. 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.
  10. Hsiao,Cheng, 2003. "Analysis of Panel Data," Cambridge Books, Cambridge University Press, number 9780521522717, 9.
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  12. 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.
  13. Gerdtham, Ulf-G. & Lothgren, Mickael, 2000. "On stationarity and cointegration of international health expenditure and GDP," Journal of Health Economics, Elsevier, vol. 19(4), pages 461-475, July.
  14. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  15. 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.
  16. Dreger, Christian & Reimers, Hans-Eggert, 2005. "Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis," IZA Discussion Papers 1469, Institute for the Study of Labor (IZA).
  17. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August.
  18. Julien Fouquau & Christophe Hurlin & Isabelle Rabaud, 2007. "The Feldstein-Horioka Puzzle: a Panel SmoothTransition Regression Approach," Working Papers halshs-00156688, HAL.
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  20. Hartwig, Jochen, 2008. "What drives health care expenditure?--Baumol's model of 'unbalanced growth' revisited," Journal of Health Economics, Elsevier, vol. 27(3), pages 603-623, May.
  21. Felder, Stefan & Meier, Markus & Schmitt, Horst, 2000. "Health care expenditure in the last months of life," Journal of Health Economics, Elsevier, vol. 19(5), pages 679-695, September.
  22. Gerdtham, Ulf-G. & Sogaard, Jes & Andersson, Fredrik & Jonsson, Bengt, 1992. "An econometric analysis of health care expenditure: A cross-section study of the OECD countries," Journal of Health Economics, Elsevier, vol. 11(1), pages 63-84, May.
  23. McCoskey, Suzanne K. & Selden, Thomas M., 1998. "Health care expenditures and GDP: panel data unit root test results," Journal of Health Economics, Elsevier, vol. 17(3), pages 369-376, June.
  24. Oecd, 2006. "Projecting OECD Health and Long-Term Care Expenditures: What Are the Main Drivers?," OECD Economics Department Working Papers 477, OECD Publishing.
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Cited by:
  1. Lena Dräger & Jan-Oliver Menz & Ulrich Fritsche, 2014. "Perceived inflation under loss aversion," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 46(3), pages 282-293, January.
  2. Seher Sülkü & Asena Caner, 2011. "Health care expenditures and gross domestic product: the Turkish case," The European Journal of Health Economics, Springer, vol. 12(1), pages 29-38, February.
  3. Lago-Peñas, Santiago & Cantarero-Prieto, David & Blázquez-Fernández, Carla, 2013. "On the relationship between GDP and health care expenditure: A new look," Economic Modelling, Elsevier, vol. 32(C), pages 124-129.

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