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The determinants of health expenditures: evidence from US state-level data


  • Zijun Wang


Most macro studies of what determines health expenditures have used the same panel of OECD country-level data. Based on a more homogeneous panel data set of US states we constructed, this note applies the model selection procedure to identify the determinants of health expenditures at the state level. We find that the four key factors are gross state products, the proportion of the population over the age of 65, the degree of urbanization and the number of hospital beds. The cross-section income elasticity of health care is around 0.7, implying that health care is a necessity rather than a luxury good at the state level. The (relative) price of health care varies significantly across states but does not appear to have real effects on the amount of resources (measured in real dollars) a state devotes to health care.

Suggested Citation

  • Zijun Wang, 2009. "The determinants of health expenditures: evidence from US state-level data," Applied Economics, Taylor & Francis Journals, vol. 41(4), pages 429-435.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:4:p:429-435
    DOI: 10.1080/00036840701704527

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    Cited by:

    1. Abdul Wahab, Abdul Azeez Oluwanisola & Kefeli, Zurina & Hashim, Nurhazirah, 2018. "Investigating The Dynamic Effect of Healthcare Expenditure and Education Expenditure On Economic Growth in Organisation of Islamic Countries (OIC)," MPRA Paper 90338, University Library of Munich, Germany, revised 19 Oct 2018.
    2. Chortareas, Georgios & Logothetis, Vassilis & Papandreou, Andreas, 2018. "Public Opinion, Elections, and Environmental Fiscal Policy," Cardiff Economics Working Papers E2018/9, Cardiff University, Cardiff Business School, Economics Section.
    3. Oliver Fritz & Peter Mayerhofer & Reinhard Haller & Gerhard Streicher & Florian Bachner & Herwig Ostermann, 2013. "Die regionalwirtschaftlichen Effekte der österreichischen Krankenanstalten," WIFO Studies, WIFO, number 46672.
    4. Bose, Srimoyee, 2015. "Determinants of Per Capita State-Level Health Expenditures in the United States: A Spatial Panel Analysis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(1).
    5. Serap Taskaya & Mustafa Demirkiran, 2016. "The Causality between Healthcare Resources and Health Expenditures in Turkey. A Granger Causality Method," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(2), pages 98-103, April.
    6. Błażej Łyszczarz, 2018. "Determinanty wydatków na zdrowie w gospodarstwach domowych w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 137-157.
    7. Fahad Alzahrani & Alan R. Collins & Elham Erfanian, 2019. "Drinking Water Quality Impacts on Health Care Expenditures in the United States," Working Papers Working Paper 2019-02, Regional Research Institute, West Virginia University.
    8. Vandersteegen, Tom & Marneffe, Wim & Cleemput, Irina & Vereeck, Lode, 2015. "The impact of no-fault compensation on health care expenditures: An empirical study of OECD countries," Health Policy, Elsevier, vol. 119(3), pages 367-374.
    9. Nilgun Yavuz & Veli Yilanci & Zehra Ozturk, 2013. "Is health care a luxury or a necessity or both? Evidence from Turkey," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(1), pages 5-10, February.
    10. Masayoshi Hayashi & Akiko Oyama, "undated". "Factor decomposition of inter-prefectural health care expenditure disparities in Japan," Discussion papers ron264, Policy Research Institute, Ministry of Finance Japan.
    11. Di Matteo, Livio & Cantarero-Prieto, David, 2018. "The Determinants of Public Health Expenditures: Comparing Canada and Spain," MPRA Paper 87800, University Library of Munich, Germany.
    12. Luca Grassetti & Laura Rizzi, 2019. "The determinants of individual health care expenditures in the Italian region of Friuli Venezia Giulia: evidence from a hierarchical spatial model estimation," Empirical Economics, Springer, vol. 56(3), pages 987-1009, March.
    13. Clemente, Jesús & Lázaro-Alquézar, Angelina & Montañés, Antonio, 2019. "US state health expenditure convergence: A revisited analysis," Economic Modelling, Elsevier, vol. 83(C), pages 210-220.
    14. Vitor Castro, 2017. "Pure, White and Deadly… Expensive: A Bitter Sweetness in Health Care Expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 1644-1666, December.
    15. Genevieve E O'Connor, 2016. "Investigating the significance of insurance and income on health service utilization across generational cohorts," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 21(1), pages 19-33, March.
    16. Andrew J. Rettenmaier & Zijun Wang, 2012. "Regional variations in medical spending and utilization: a longitudinal analysis of US Medicare population," Health Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 67-82, February.

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