Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/36776
Authors: 
Baltagi, Badi H.
Moscone, Francesco
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4851
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.
Subjects: 
Health expenditure
income elasticity
cross section dependence
heterogeneous panels
factor models
JEL: 
C31
C33
H51
Document Type: 
Working Paper

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