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
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
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Working Paper: Modelling time-varying income elasticities of health care expenditure for the OECD (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2018-29
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