Convergence Analysis of Health Care Expenditure in the EU Countries Using Two Approaches

Convergence analysis in economics has largely been confined to macro-indicators such as GDP income and applied within identifiable regions of the world or between developing and developed countries. This paper reports on the application of adapted methods within this discipline to the area of health care expenditure in the countries of the European Union in order to determine if differences in health care spending are diminishing over time. In answering this question we utilise two distinct approaches. The first tests for the presence of s-convergence using cross-sectional data over the period 1960-95 which provides an overall measure of change in dispersion for two chosen variables; total health expenditure as a share of GDP and per capita health expenditure. The second method utilises a panel of data for 1980-95 and tests for the presence of b-convergence in the same variables but also includes per capita income in the derivation of a regression model. Both methods confirm the presence of statistically significant convergence over the periods examined. Our results also identify sub-groupings based on health system typology and graphical representations illustrate which countries are contributing to the observed convergence. Our findings are important as they confirm that greater integration in health expenditure is occurring in the EU.