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A multilevel analysis on the determinants of regional health care expenditure. A note


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  • Guillem López


  • Marc Sáez
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    We apply a multilevel hierarchical model to explore whether an aggregation fallacy exists in estimating the income elasticity of health expenditure by ignoring the regional composition of national health expenditure figures. We use data for 110 regions in eight OECD countries in 1997: Australia, Canada, France, Germany, Italy, Spain, Sweden and United Kingdom. In doing this we have tried to identify two sources of random variation: within countries and between-countries. Our results show that: 1- Variability between countries amounts to (SD) 0.5433, and just 13% of that can be attributed to income elasticity and the remaining 87% to autonomous health expenditure; 2- Within countries, variability amounts to (SD) 1.0249; and 3- The intra-class correlation is 0.5300. We conclude that we have to take into account the degree of fiscal decentralisation within countries in estimating income elasticity of health expenditure. Two reasons lie behind this: a) where there is decentralisation to the regions, policies aimed at emulating diversity tend to increase national health care expenditure; and b) without fiscal decentralisation, central monitoring of finance tends to reduce regional diversity and therefore decrease national health expenditure.

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    Bibliographic Info

    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 572.

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    Date of creation: Oct 2001
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    Handle: RePEc:upf:upfgen:572

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    Keywords: OECD health expenditure; fiscal federalism; multilevel hierarchical models;

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    1. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
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    Cited by:
    1. Jorgen Lauridsen & Mariluz Sánchez & Mickael Bech, 2010. "Public pharmaceutical expenditure: identification of spatial effects," Journal of Geographical Systems, Springer, vol. 12(2), pages 175-188, June.
    2. Jorgen Lauridsen & Mickael Bech & Fernando López & Mariluz Sánchez, 2010. "A spatiotemporal analysis of public pharmaceutical expenditure," The Annals of Regional Science, Springer, vol. 44(2), pages 299-314, April.


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