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Health Care Expenditure and Income in the OECD Reconsidered: Evidence from Panel Data

  • Badi H. Baltagi
  • Francesco Moscone

    ()

This paper reconsiders the long-run economic relationship between health care expenditure and income using a panel of 20 OECD countries observed over the period 1971-2004. In particular, the paper studies the non-stationarity and cointegration properties between health care spending and income. This is done in a panel data context controlling for both cross-section dependence and unobserved heterogeneity. Cross-section dependence is modelled through a common factor model and through spatial dependence. Heterogeneity is handled through fixed effects in a panel homogeneous model and through a panel heterogeneous model. Our findings suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in previous studies.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp09-5.pdf
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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 09/5.

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Date of creation: Feb 2009
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Handle: RePEc:lec:leecon:09/5
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