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

By Badi H. Baltagi and Francesco Moscone

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

Topics: Health expenditure, income elasticity, cross section de-pendence, heterogeneous panels, factor models
Publisher: Dept. of Economics, University of Leicester
Year: 2009
OAI identifier: oai:lra.le.ac.uk:2381/7594

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