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

Abstract

This paper examines the linkationship between health care expenditures and gdp for 21 oecd countries using panel cointegration techniques. the analysis accounts for the fact that health care expenditures are not solely driven by income, but also by medical progress, where different measures are used. in the extended models, cointegration can be established. the income elasticity is not different from unity, implying that health care is not a luxury good. this finding is robust for alternative proxies of medical progress, and various estimators of the cointegration vector. in addition, cointegration can be detected even between nonstationary common factors.health care expenditures; medical progress, panel cointegration, common factors