Modelling time-varying income elasticities of health care expenditure for the OECD

Isabel Casas (), Jiti Gao and Shangyu Xie ()

No 22/18, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: 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.

Keywords: cross-sectional dependence; health expenditure; income elasticity; nonparametric kernel smoothing; non-stationarity; super-consistency. (search for similar items in EconPapers)
JEL-codes: C14 C23 G13 H51 (search for similar items in EconPapers)
Pages: 46
Date: 2018
New Economics Papers: this item is included in nep-hea
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Related works:
Working Paper: Modelling Time-Varying Income Elasticities of Health Care Expenditure for the OECD (2018)
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