Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253749 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Economics, Finance and Administrative Science [ISSN:] 2218-0648 [Volume:] 23 [Issue:] 44 [Publisher:] Emerald Publishing Limited [Place:] Bingley [Year:] 2018 [Pages:] 77-94
Publisher: 
Emerald Publishing Limited, Bingley
Abstract: 
This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006. Design/methodology/approach This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence. Findings The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process. Research limitations/implications The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study's conclusions do not apply to non-urban areas. Practical implications The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting. Social implications Payers (private and public employers) of health-care insurance rates in US urban areas should evaluate the value of benefits received in relation to the skyrocketing rise of health-care insurance premiums. Originality/value This is the first empirical research focusing on the shape of urban health-care inflation rates in the USA.
Subjects: 
Cross-sectional dependence
Health-care price inflation rate
Multiple structural breaks
Panel unit root tests
JEL: 
C32
E31
I1
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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