Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110965
Authors: 
Caporale, Guglielmo Maria
Cunado, Juncal
Gil-Alana, Luis A.
Gupta, Rangan
Year of Publication: 
2015
Series/Report no.: 
DIW Discussion Papers 1486
Abstract: 
This study examines the relationship between healthcare expenditure and disposable income in the 50 US states over the period 1966-2009 using fractional integration and cointegration techniques. The degree of integration and nonlinearity of both series are found to vary considerably across states, whilst the fractional cointegration analysis suggests that a long-run relationship exists between them in only 11 out of the 50 US states. The estimated long-run income elasticity of healthcare expenditure suggests that health care is a luxury good in these states. By contrast, the short-run elasticity obtained from the regressions in first differences is in the range (0,1) for most US states, which suggests that health care is a necessity good instead. The implications of these results for health policy are also discussed.
Subjects: 
healthcare expenditure
income elasticity
US states
fractional integration
fractional cointegration
JEL: 
C22
C32
H51
I18
Document Type: 
Working Paper

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