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Re-visiting the Health Care Luxury Good Hypothesis: Aggregation, Precision, and Publication Biases?

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  • Costa-Font, J
  • Gemmill M
  • Rubert G

Abstract

While a growing literature examining the relationship between income and health expenditures suggests that health care is a luxury good, this conclusion is contentiously debated due to heterogeneity of the existing results. This paper tests the luxury good hypothesis (namely that income elasticity exceed unity) using meta-regression analysis, taking into consideration publication selection and aggregation bias. The findings suggest that publication bias exists, a result that is robust to the meta-regression model employed. Publication selection and aggregation bias also appear to play a role in the generation of estimates. The corrected income elasticity estimates range from 0.4 to 0.8, which cast serious doubt on the validity of luxury good hypothesis. Nonetheless, due to the importance of aggregation, we cannot reject the luxury good hypothesis for aggregate time series data.

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Paper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 09/02.

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Date of creation: Jan 2009
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Handle: RePEc:yor:hectdg:09/02
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Keywords: meta-regression analysis; health care; luxury good; income elasticity; aggregate health expenditure; regional health expenditure;

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Find related papers by JEL classification:
  • I1 - Health, Education, and Welfare - - Health
  • I10 - Health, Education, and Welfare - - Health - - - General
  • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
  • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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Cited by:

  1. T.D. Stanley & Stephen B. Jarrell & Hristos Doucouliagos, 2009. "Could It Be Better to Discard 90% of the Data? A Statistical Paradox," Economics Series 2009_13, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  2. Benjamin Ho & Sita N. Slavov, 2012. "An alternative perspective on health inequality," Economics Bulletin, AccessEcon, vol. 32(4), pages 3182-3196.
  3. David Prieto & Santiago Lago-Peñas, 2012. "Decomposing the determinants of health care expenditure: the case of Spain," The European Journal of Health Economics, Springer, vol. 13(1), pages 19-27, February.

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