The Relationship between Healthcare Expenditure and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis

Guglielmo Maria Caporale, Juncal Cuñado (), Luis Gil-Alana and Rangan Gupta

No 1486, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This study examines the relationship between healthcare expenditure and disposable income in the 50 US states over the period 1966-2009 using fractional integration and cointegration techniques. The degree of integration and nonlinearity of both series are found to vary considerably across states, whilst the fractional cointegration analysis suggests that a long-run relationship exists between them in only 11 out of the 50 US states. The estimated long-run income elasticity of healthcare expenditure suggests that health care is a luxury good in these states. By contrast, the short-run elasticity obtained from the regressions in first differences is in the range (0,1) for most US states, which suggests that health care is a necessity good instead. The implications of these results for health policy are also discussed.

Keywords: Healthcare expenditure; income elasticity; US states; fractional integration; fractional cointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 H51 I18 (search for similar items in EconPapers)
Pages: 33 p.
Date: 2015
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The relationship between healthcare expenditure and disposable personal income in the US states: a fractional integration and cointegration analysis (2018)
Working Paper: The Relationship between Healthcare Expenditure and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis (2015)
Working Paper: The Relationship between Healthcare expenditures and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis (2015)
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