Spurious Correlation in Estimation of the Health Production Function: A Note

KOF Working Papers No. 227

15 Pages Posted: 18 May 2009

See all articles by Sule Akkoyunlu

Sule Akkoyunlu

ETH Zürich - KOF Swiss Economic Institute; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Frank R. Lichtenberg

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Boriss Siliverstovs

German Institute for Economic Research (DIW Berlin) - Department of International Economics

Peter Zweifel

University of Zurich - Department of Economics

Date Written: May 5, 2009

Abstract

In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be linearly related to these two factors. Therefore, the estimates reported by Lichtenber (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States.

Keywords: health, life expectancy, innovation, pharmaceuticals, health care expenditure, cointegration

JEL Classification: H51, I12, J18, C22, C32, O33

Suggested Citation

Akkoyunlu, Sule and Lichtenberg, Frank R. and Siliverstovs, Boriss and Zweifel, Peter, Spurious Correlation in Estimation of the Health Production Function: A Note (May 5, 2009). KOF Working Papers No. 227, Available at SSRN: https://ssrn.com/abstract=1402706 or http://dx.doi.org/10.2139/ssrn.1402706

Sule Akkoyunlu (Contact Author)

ETH Zürich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

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Frank R. Lichtenberg

Columbia Business School - Finance and Economics ( email )

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HOME PAGE: http://https://www8.gsb.columbia.edu/cbs-directory/detail/frl1

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

Boriss Siliverstovs

German Institute for Economic Research (DIW Berlin) - Department of International Economics ( email )

Mohrenstraße 58
Berlin, 10117
Germany

HOME PAGE: http://www.diw.de/programme/jsp/MA.jsp?language=en&uid=bsiliverstovs

Peter Zweifel

University of Zurich - Department of Economics ( email )

Zuerich
Switzerland

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