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Re-visiting the Health Care Luxury Good Hypothesis: Aggregation, Precision, and Publication Biases?

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Author Info
Costa-Font, J
Gemmill, M
Rubert, G

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Abstract

While a growing literature examining the relationship between income and health expenditures suggests that health care is a luxury good, this conclusion is contentiously debated due to heterogeneity of the existing results. This paper tests the luxury good hypothesis (namely that income elasticity exceed unity) using meta-regression analysis, taking into consideration publication selection and aggregation bias. The findings suggest that publication bias exists, a result that is robust to the meta-regression model employed. Publication selection and aggregation bias also appear to play a role in the generation of estimates. The corrected income elasticity estimates range from 0.4 to 0.8, which cast serious doubt on the validity of luxury good hypothesis. Nonetheless, due to the importance of aggregation, we cannot reject the luxury good hypothesis for aggregate time series data.

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Paper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 09/02.

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Date of creation: Jan 2009
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Handle: RePEc:yor:hectdg:09/02

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Related research
Keywords: meta-regression analysis; health care; luxury good; income elasticity; aggregate health expenditure; regional health expenditure;

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Find related papers by JEL classification:
I1 - Health, Education, and Welfare - - Health
I10 - Health, Education, and Welfare - - Health - - - General
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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