Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis

20 Pages Posted: 21 Jan 2005

See all articles by Christian Dreger

Christian Dreger

European University Viadrina Frankfurt (Oder); IZA Institute of Labor Economics; Chinese Academy of Social Sciences (CASS)

Hans-Eggert Reimers

Hochschule Wismar

Date Written: January 2005

Abstract

This paper investigates the link between health care expenditures and GDP for a sample of 21 OECD countries using recent developed panel cointegration techniques. In contrast to previous studies, the analysis accounts for the fact that health care expenditures are not only determined by income. The other driving force is medical progress, which is proxied by different variables, like life expectancy, infant mortality and the share of the elderly. In the extended models, a cointegration relationship can be established among the variables. The income elasticity is not different from unity, implying that health care expenditures are not a luxury good. This finding is robust for alternative measures of medical progress. The evidence is unchanged, if alternative estimators of the cointegration vector are used. Controlling for cross section dependency does not affect the principal results, as cointegration can be found even in a model among nonstationary common factors.

Keywords: health care expenditures; medical progress, panel cointegration

JEL Classification: C23, I10

Suggested Citation

Dreger, Christian and Reimers, Hans-Eggert, Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis (January 2005). IZA Discussion Paper No. 1469. Available at SSRN: https://ssrn.com/abstract=651985

Christian Dreger (Contact Author)

European University Viadrina Frankfurt (Oder) ( email )

Frankfurt (Oder)
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732
China

Hans-Eggert Reimers

Hochschule Wismar ( email )

FB Wirtschaft
Philipp-Mueller-Str. PF 1210
23952 Wismar
Germany
49-3841-753-601 (Phone)
49-3841-753-383 (Fax)

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