Econometric Models of Private and Public Health Expenditure in OECD Countries, 1970-96

Abstract

We analyse the evolution of Private Consumption on Health, having into account that there are substitution effects between public and private expenditure in OECD countries. From the analysis of the evolution of these variables our main conclusion is that the increase of expenditure on Health, with economic development, is generally positive for welfare and obeys to a rational behaviour of consumers. So we do not agree with the propositions and attempts to cut public expenditure on this important service which sometimes is made in the name of a kind economic efficiency that does not have into account, in the desirable degree, the quality of services and social welfare. We estimate some econometric models for private expenditure and the results confirm the existence of a high degree of substitution, what means that diminutions in public expenditure do not imply diminution in total expenditure on health but an increases in private one. The findings support a distribution between private and public expenditure, in order to guarantee general assistance of population, to get high standards of consumers welfare, accordingly with the stage of economic development, and to avoid abuses in demand of free public health services.

Keywords: Health Economics, Consumption of Health Services, OECD countries, Econometric Models, Private and Public Health Expenditure

JEL Classification: C5, C51, H51, H52, I1, I2, O51, O52, O57