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The Relationship between Healthcare expenditures and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis

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  • Guglielmo Maria Caporale

    () (Department of Economics and Finance, Brunel University London, UB8 3PH, UK)

  • Juncal Cunado

    () (University of Navarra, Pamplona, Spain)

  • Luis A. Gil - Alana

    () (University of Navarra, Pamplona, Spain)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

Abstract

This study examines the relationship between healthcare expenditure and disposable income in the 50 US states over the period 1966-2009 using fractional integration and cointegration techniques. The degree of integration andnon-linearityof both series are found to vary considerably across states, whilst the fractional cointegration analysis suggests that a long-run relationship exists between them in only 11 out of the 50 US states.The estimated long-run income elasticity of healthcare expendituresuggests that healthcareis a luxury good in these states. By contrast, the short-run elasticity obtained from the regressions in first differences is in the range (0,1) for most US states, which suggeststhat healthcareis a necessity good instead. Theimplications of these results for health policy are also discussed.

Suggested Citation

  • Guglielmo Maria Caporale & Juncal Cunado & Luis A. Gil - Alana & Rangan Gupta, 2015. "The Relationship between Healthcare expenditures and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis," Working Papers 201532, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201532
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    Cited by:

    1. Murthy, Vasudeva N.R. & Okunade, Albert A., 2016. "Determinants of U.S. health expenditure: Evidence from autoregressive distributed lag (ARDL) approach to cointegration," Economic Modelling, Elsevier, vol. 59(C), pages 67-73.
    2. repec:spr:soinre:v:133:y:2017:i:1:d:10.1007_s11205-016-1357-7 is not listed on IDEAS
    3. Nicholas Apergis & Rangan Gupta & Chi Keung Marco Lau & Zinnia Mukherjee, 2016. "An Analysis of the Relationship between U.S. State Level Carbon Dioxide Emissions and Health Care Expenditure," Working Papers 201618, University of Pretoria, Department of Economics.
    4. Nicholas Apergis & Tsangyao Chang & Christina Christou & Rangan Gupta, 2017. "Convergence of Health Care Expenditures Across the US States: A Reconsideration," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 303-316, August.

    More about this item

    Keywords

    Healthcare expenditure; income elasticity; US states; fractionalintegration; fractionalcointegration;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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