Sule Akkoyunlu () (Socioeconomic Institute, University of Zurich) Frank R. Lichtenberg () (Columbia University, Graduate School of Business, New York) Boriss Siliverstovs () (KOF Swiss Economic Institute, Federal Institute of Technology, Zurich) Peter Zweifel () (Socioeconomic Institute, University of Zurich)
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In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be linearly related to these two factors. Therefore, the estimates reported by Lichtenberg (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States.
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Paper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number
0903.
Find related papers by JEL classification: H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health I12 - Health, Education, and Welfare - - Health - - - Health Production J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
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