Determinants of Health Care Demand and Expenditure: A Review of the Literature

Purpose: Health care constitutes a major component of modern economies, affecting population well-being, employment growth, and national income allocation. This paper provides a comprehensive review of the international literature on the determinants of health care demand and expenditures, with particular emphasis on price, income, population aging, technological change, and the supply of physicians and nurses. Design/Methodology/Approach: Detailed literature review. Findings: The evidence reviewed indicates that the price elasticity of demand for health care is consistently negative and inelastic, supporting the characterization of health care as a normal good. Considerable debate persists regarding income elasticity, with empirical results ranging below, near, and above unity across countries, time horizons, and econometric specifications. Practical Implications: The study highlights the conceptual ambiguity surrounding the definition of health care demand, noting that prior research has measured it using alternative indicators such as hospital stays, physician visits, and medical expenditures, which partly explains variation in empirical findings. Originality/Value: The findings suggest that income elasticity varies internationally and is sensitive to distinctions between short-run and long-run dynamics, as well as to the nature and cost of specific medical services.