Time-varying income elasticities of healthcare expenditure for the OECD and Eurozone

Isabel Casas, Jiti Gao, Bin Peng, Shangyu Xie

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Abstract

We propose a panel data model for nonstationary variables with interactive fixed effects and coefficients that may vary over time and use it to examine time variation in the income elasticity of health expenditures in the OECD and the Eurozone. Our empirical analysis shows that the income elasticity of healthcare expenditure slightly increased in the OECD and the Eurozone during 1995–2004 but remained below one. This finding suggests that healthcare is not a luxury good in these countries.

Original languageEnglish
Number of pages18
JournalJournal of Applied Econometrics
Volume36
Issue number3
DOIs
Publication statusAccepted/In press - 2021

Keywords

  • health expenditure
  • income elasticity
  • nonlinear cointegration panel data
  • nonparametric kernel smoothing
  • nonstationarity

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