Department of Economics and Business Economics

Modelling Time-Varying Income Elasticities of Health Care Expenditure for the OECD

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  • rp18_29

    Final published version, 1 MB, PDF-document

    Isabel Casas, Syddansk Universitet, Jiti Gao, Monash University, AustraliaShangyu Xie, University of International Business and Economics, China
Income elasticity dynamics of health expenditure is considered for the OECD and the Eurozone over the period 1995-2014. This paper studies a novel non-linear cointegration model with fixed effects, controlling for cross-section dependence and unobserved heterogeneity. Most importantly, its coefficients can vary over time and its variables can be non-stationary. The resulting asymptotic theory is fundamentally different with a faster rate of convergence to similar kernel smoothing methodologies. A fully modified kernel regression method is also proposed to reduce the asymptotic bias. Results show a steep increase in the income elasticity for the OECD and a small increase for the Eurozone.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Univeritet
Number of pages43
Publication statusPublished - 3 Dec 2018
SeriesCREATES Research Papers
Number2018-29

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