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, Australia
  • Shangyu 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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