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Does Misery Index Matter for the Persistence of Health Spending? Evidence from OECD Countries

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  • Po-Chin Wu
  • Shiao-Yen Liu
  • Sheng-Chieh Pan

Abstract

This paper employs the panel smooth transition regression (PSTR) model to investigate the role of Okun’s misery index in the persistence of health spending in 19 OECD countries from 1980 to 2010. The empirical result shows that the health spending in the sample countries displays a nonlinear dynamic path and a high level of persistence. Compared to the constant persistence of the health spending in the linear model, the persistence effect in our constructed PSTR model depends on one-period lagged Okun’s misery index, which varies with time and across countries. In addition, there is a trade-off for the governments of 19 OECD countries to lower misery index and suppress the growth of health spending. In particular, the negative impact of one-period lagged misery index on the persistence is increasing (decreasing) when one-period lagged misery index is below (above) its threshold value (i.e., 11.1333 %). Finally, a high persistence of health spending means that current health spending is less disturbed by current shocks. Thus, revising health care system is more efficient than improving macroeconomic conditions for a government to suppress the growth in health spending. Copyright Springer Science+Business Media Dordrecht 2014

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  • Po-Chin Wu & Shiao-Yen Liu & Sheng-Chieh Pan, 2014. "Does Misery Index Matter for the Persistence of Health Spending? Evidence from OECD Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(2), pages 893-910, September.
  • Handle: RePEc:spr:soinre:v:118:y:2014:i:2:p:893-910
    DOI: 10.1007/s11205-013-0450-4
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    4. Cakici, Nusret & Zaremba, Adam, 2023. "Misery on Main Street, victory on Wall Street: Economic discomfort and the cross-section of global stock returns," Journal of Banking & Finance, Elsevier, vol. 149(C).
    5. Sakiru Adebola Solarin & Luis A. Gil-Alana & Carmen Lafuente, 2020. "Persistence of the Misery Index in African Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(3), pages 825-841, February.
    6. Wu, Po-Chin & Liu, Shiao-Yen & Chen, Che-Ying, 2016. "Re-examining risk premiums in the Fama–French model: The role of investor sentiment," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 154-171.
    7. Wu, Po-Chin & Liu, Shiao-Yen & Hsiao, Juei-Ming & Huang, Tsai-Yuan, 2016. "Nonlinear and time-varying growth-tourism causality," Annals of Tourism Research, Elsevier, vol. 59(C), pages 45-59.
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