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The determinants of health‐care expenditure: new results from semiparametric estimation

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  • Helmut Herwartz
  • Bernd Theilen

Abstract

Recent cross‐country studies have questioned the existence of a systematic relationship between per capita health‐care expenditure (HCE) and explanatory variables such as income, population ageing and total public expenditure. We reexamine this issue mainly focussing at a flexible semiparametric estimation method that allows the parameters of the model to depend on a state variable. Using the age structure of the population as the state variable, we find that the income elasticity increases with population ageing, while other explanatory variables are not significantly influenced by it. Additionally we find that the HCE relationship becomes more and more unstable in ageing economies. These results explain the difficulty to identify both the influence of population ageing and income on HCE in previous studies. Furthermore they indicate that international convergence of HCE across countries crucially depends on the convergence of the population age structure. We also discuss the policy implications of our results regarding the design of a fair health‐care financing system and the evolution of HCE to avoid budgetary problems. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Helmut Herwartz & Bernd Theilen, 2010. "The determinants of health‐care expenditure: new results from semiparametric estimation," Health Economics, John Wiley & Sons, Ltd., vol. 19(8), pages 964-978, August.
  • Handle: RePEc:wly:hlthec:v:19:y:2010:i:8:p:964-978
    DOI: 10.1002/hec.1540
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    File URL: https://doi.org/10.1002/hec.1540
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    References listed on IDEAS

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    1. Brigitte Dormont & Michel Grignon & Hélène Huber, 2006. "Health expenditure growth: reassessing the threat of ageing," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 947-963, September.
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    3. Herwartz, H. & Xu, F., 2009. "A new approach to bootstrap inference in functional coefficient models," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2155-2167, April.
    4. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
    5. Boswijk, H. Peter, 1995. "Efficient inference on cointegration parameters in structural error correction models," Journal of Econometrics, Elsevier, vol. 69(1), pages 133-158, September.
    6. Andreas Werblow & Stefan Felder & Peter Zweifel, 2007. "Population ageing and health care expenditure: a school of ‘red herrings’?," Health Economics, John Wiley & Sons, Ltd., vol. 16(10), pages 1109-1126, October.
    7. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August.
    8. Helmut Herwartz & Bernd Theilen, 2003. "The determinants of health care expenditure: testing pooling restrictions in small samples," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 113-124, February.
    9. Newhouse, Joseph P., 1987. "Cross national differences in health spending what do they mean?," Journal of Health Economics, Elsevier, vol. 6(2), pages 159-162, June.
    10. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
    11. Blomqvist, A. G. & Carter, R. A. L., 1997. "Is health care really a luxury?," Journal of Health Economics, Elsevier, vol. 16(2), pages 207-229, April.
    12. repec:dau:papers:123456789/3881 is not listed on IDEAS
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    Cited by:

    1. 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.
    2. Özlem Yorulmaz, 2016. "Can healthcare ever be less than a necessity in MENA countries? A semiparametric estimation of the relationship between healthcare expenditure and GDP," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(3), pages 1233-1244, May.
    3. Herwartz, Helmut & Theilen, Bernd, 2014. "Partisan influence on social spending under market integration, fiscal pressure and institutional change," European Journal of Political Economy, Elsevier, vol. 34(C), pages 409-424.
    4. Haizhen Mou, 2012. "The political economy of public health expenditure and wait times in a public‐private mixed health care system," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1640-1666, November.
    5. Anne Mason & Idaira Rodriguez Santana & María José Aragón & Nigel Rice & Martin Chalkley & Raphael Wittenberg & Jose-Luis Fernandez, 2019. "Drivers of health care expenditure: Final report," Working Papers 169cherp, Centre for Health Economics, University of York.
    6. Helmut Herwartz & Bernd Theilen, 2014. "Health Care And Ideology: A Reconsideration Of Political Determinants Of Public Healthcare Funding In The Oecd," Health Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 225-240, February.

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