The Determinants of Health Care Expenditure and Trends: A Semiparametric Panel Data Analysis of OECD Countries

Ming Kong, Jiti Gao and Xueyan Zhao

A chapter in Essays in Honor of Cheng Hsiao, 2020, vol. 41, pp 191-216 from Emerald Group Publishing Limited

Abstract: This chapter re-examines the determinants of health care expenditure (HCE), using a panel of 32 Organization for Economic Cooperation and Development (OECD) countries from 1990 to 2012. In particular, a panel semiparametric technique (i.e., a partially linear model) is employed, with cross-sectional dependence allowed. Beside the study of coefficients, this chapter investigates the trending functions of HCE. After the common and individual trends of HCE are estimated via semiparametric methods, the authors calibrate them with polynomial specifications, leading to out-of-sample forecasting. The validities of the calibration are tested as well. Contrary to those studies that do not take into account time series properties, our finding suggests that medical care is not a luxury commodity. Other determinants, such as public financing, and the supply of doctors, are all positively related to HCE. Moreover, the calibrated trending models perform well in out-of-sample forecasting.

Keywords: Cross-sectional dependence; detection of trend; heterogeneity; parametric calibration; partially linear model; healthcare expenditure (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-905320200000041006

DOI: 10.1108/S0731-905320200000041006

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