Health care expenditure and income in the OECD reconsidered: Evidence from panel data

Badi H. Baltagi, Francesco Moscone

Research output: Contribution to journalArticle

154 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)804-811
Number of pages8
JournalEconomic Modelling
Volume27
Issue number4
DOIs
StatePublished - Jul 2010

Keywords

  • Cross-section dependence
  • Factor models
  • Health expenditure
  • Heterogeneous panels
  • Income elasticity

ASJC Scopus subject areas

  • Economics and Econometrics

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