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Is Taking a Pill a Day Good for Health Expenditures? Evidence from a Cross Section Time Series Analysis of 19 OECD Countries from 1970 – 2000

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  • Verbelen, Bart

    (CEPS/INSTEAD (IMPALLA))

Abstract

This paper differs in two ways from previous comparative health system research. First, it focuses on the impact of pharmaceutical expenditures on total health expenditures as trends in pharmaceutical expenditures have been blamed of being a major driver of national health expenditures. In addition to pharmaceutical expenditures, other variables of interest are income, public financing, public delivery, ageing and urbanization. Second, the analysis includes a thorough sensitivity analysis on the proposed model using four samples (with and without the US, and imputed and not imputed data) to address the issue of robustness. Based on a typology of health care systems, trends of relevant explanatory variables are described using OECD Health Data 2003 data. Unlike any other of the variables, pharmaceutical expenditures show contradicting trends when measured as per capita pharmaceutical expenditures and pharmaceutical share of total health expenditures. Next, a regression analysis is performed on data from 1970 – 2000 for 19 OECD countries. Regression diagnostics indicated the absence of multicollinearity but the presence of heteroscedasticity and autocorrelation. Based on the Hausman test, a fixed effect model was chosen. As in all previous empirical research, per capita GDP turned out to be the most influential explanatory variable. While public financing of health care was always three out of four samples significantly inversely related to health expenditures, public delivery as a NHS dummy was always significantly positively related to the dependent variable. Unlike previous research, ageing is consistently and significantly related to higher total health expenditures and, so is urbanization. Finally, all samples show a highly negative relationship between share of pharmaceutical expenditures and health expenditures, suggesting support for the substitution theory.

Suggested Citation

  • Verbelen, Bart, 2006. "Is Taking a Pill a Day Good for Health Expenditures? Evidence from a Cross Section Time Series Analysis of 19 OECD Countries from 1970 – 2000," IRISS Working Paper Series 2006-01, IRISS at CEPS/INSTEAD.
  • Handle: RePEc:irs:iriswp:2006-01
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    Cited by:

    1. Yihua Yu & Li Zhang & Fanghua Li & Xinye Zheng, 2013. "Strategic interaction and the determinants of public health expenditures in China: a spatial panel perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 203-221, February.
    2. Voicu, Malina & Voicu, Bogdan & Strapcova, Katarina, 2006. "Housework and gender inequality across Europe," IRISS Working Paper Series 2006-11, IRISS at CEPS/INSTEAD.
    3. Van Kerm, Philippe, 2006. "Comparisons of income mobility profiles," IRISS Working Paper Series 2006-03, IRISS at CEPS/INSTEAD.
    4. Sirovatka, Tomas & Valentova, Marie, 2006. "The Legitimacy of Redistribution: the Czech Republic in International Comparison," IRISS Working Paper Series 2006-12, IRISS at CEPS/INSTEAD.
    5. Fusco, Alessio & Dickes, Paul, 2006. "Rasch Model and Multidimensional Poverty Measurement," IRISS Working Paper Series 2006-02, IRISS at CEPS/INSTEAD.

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    Keywords

    health care expenditure ; health care system ; health economics ; health policy ; comparative;

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