Health Expenditure and Income in the United States
This paper investigates the long-run economic relationship between health care expenditure and income in the US at a State level. Using a panel of 49 US States followed over the period 1980-2004, we study the non-stationarity and cointegration between health spending and income, ultimately measuring income elasticity of health care. The tests we adopt allow us to explicitly control for cross-section dependence and unobserved heterogeneity. Specifically, in our regression equations we assume that the error is the sum of a multifactor structure and a spatial autoregressive process, which capture global shocks and local spill overs in health expenditure. Our results suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in other US studies. Further, we observe a significant spatial spill over, though with a smaller intensity than that detected in other studies on spatial concentration of US health spending. Our broad perspective of cross section dependence as well as the methods used to capture it give new insights on the debate over the relationship between health spending and income.
|Date of creation:||Oct 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK|
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
|Order Information:|| Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Di Matteo, Livio & Di Matteo, Rosanna, 1998. "Evidence on the determinants of Canadian provincial government health expenditures: 1965-1991," Journal of Health Economics, Elsevier, vol. 17(2), pages 211-228, April.
- Carrion-i-Silvestre, Josep Lluis, 2005. "Health care expenditure and GDP: Are they broken stationary?," Journal of Health Economics, Elsevier, vol. 24(5), pages 839-854, September.
- Lee, Lung-Fei, 2002. "Consistency And Efficiency Of Least Squares Estimation For Mixed Regressive, Spatial Autoregressive Models," Econometric Theory, Cambridge University Press, vol. 18(02), pages 252-277, April.
When requesting a correction, please mention this item's handle: RePEc:lec:leecon:07/14. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo)
If references are entirely missing, you can add them using this form.