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

Isabel Casas (), Jiti Gao () and Shangyu Xie ()
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Jiti Gao: Monash University, Postal: Department of Econometrics and Business Statistics, Monash University, Australia
Shangyu Xie: University of International Business and Economics, Postal: RCAF and School of Banking and Finance, University of International Business and Economics, China

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

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)
New Economics Papers: this item is included in nep-ecm and nep-for
Date: 2018-11-21
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Working Paper: Modelling time-varying income elasticities of health care expenditure for the OECD (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2018-29

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