Spurious correlation in estimation of the health production function

Sule Akkoyunlu, Frank R. Lichtenberg, Boriss Silverstovs and Peter Zweifel
Authors registered in the RePEc Author Service: Boriss Siliverstovs

No 09-227, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to detect and avoid spurious correlation. It then applies it to a recent contribution by Lichtenberg (2004), which relates longevity in the United States to pharmaceutical innovation and public health care expenditure. The results of the bounds testing procedure show longevity to be linearly related to these two factors. Therefore, the estimates reported by Lichtenberg (2004) cannot be said to be result of spurious correlation, to the contrary, they very likely reflect an effective relationship, at least for the United States.

Keywords: Health; Life expectancy; Innovation; Pharmaceuticals; Health care expenditure; Cointegration (search for similar items in EconPapers)
Pages: 15 pages
Date: 2009-05
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:09-227

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