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Estimation of the determinants of household health care expenditures in Nepal with controls for endogenous illness and provider choice

  • Jeffrey J. Rous

    (Department of Economics, University of North Texas, USA)

  • David R. Hotchkiss

    (School of Public Health and Tropical Medicine, Department of International Health and Development, Tulane University, New Orleans, Louisiana, USA)

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    This paper uses the Nepal Living Standards Survey, a nationally representative sample of households from 1996, to investigate the determinants of household out-of-pocket health expenditures. The analysis uses a multi-equation joint estimation to control for endogeneity of sickness and provider choice. The results of this analysis indicate several interesting findings. First, common unobserved factors were found to be statistically significant determinants of illness, choice of provider, and health expenditures, and may cause bias to parameter estimates if not controlled. Second, the income elasticity is estimated to be 1.10, with income having both a direct effect on health expenditure, and an indirect effect through likelihood of illness and the type of provider that is chosen. Third, housing and sanitary conditions were found to have a substantial effect on illness, and as a result, out-of-pocket health care expenditures. Fourth, despite the fact that urban, ill individuals who seek care are more likely to utilize care in more expensive settings, average health care expenditure among the urban sample was found to be substantially lower than among the rural sample, partly due to a lower likelihood of reporting illnesses and injuries and of using any type of health care provider. Copyright © 2002 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.727
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    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 12 (2003)
    Issue (Month): 6 ()
    Pages: 431-451

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    Handle: RePEc:wly:hlthec:v:12:y:2003:i:6:p:431-451
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. John Akin & Jeffrey Rous, 1997. "Effect of provider characteristics on choice of contraceptive provider: A two-equation full-information maximum-likelihood estimation," Demography, Springer, vol. 34(4), pages 513-523, November.
    2. Peter A. Berman, 1997. "National Health Accounts in Developing Countries: Appropriate Methods and Recent Applications," Health Economics, John Wiley & Sons, Ltd., vol. 6(1), pages 11-30.
    3. Getzen, Thomas E., 2000. "Health care is an individual necessity and a national luxury: applying multilevel decision models to the analysis of health care expenditures," Journal of Health Economics, Elsevier, vol. 19(2), pages 259-270, March.
    4. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    5. Parker, Susan W. & Wong, Rebeca, 1997. "Household income and health care expenditures in Mexico," Health Policy, Elsevier, vol. 40(3), pages 237-255, June.
    6. Manning, W. G. & Duan, N. & Rogers, W. H., 1987. "Monte Carlo evidence on the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 35(1), pages 59-82, May.
    7. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
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