Re-visiting the Health Care Luxury Good Hypothesis: Aggregation, Precision, and Publication Biases?

Abstract

While a growing literature examining the relationship between income and health expenditures suggests that health care is a luxury good, this conclusion is contentiously debated due to heterogeneity of the existing results. This paper tests the luxury good hypothesis using meta-regression analysis, taking into consideration publication selection, precision, and aggregation bias. The findings suggest that publication bias exists, a result that is robust irrespectively of the tests employed. Precision and aggregation bias also appear to play a role in the generation of estimates. The corrected income elasticity estimates range from 0.26 to 0.84, although we cannot reject the luxury good hypothesis for some of the performed corrections.aggregate health expenditure, luxury good, regional health expenditure, health care, income elasticity, meta-regression analysis