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The Relationship between Healthcare expenditures 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 ()
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Luis Gil - Alana: University of Navarra, Pamplona, Spain

Authors registered in the RePEc Author Service: Luis Alberiko Gil-Alana ()

No 201532, Working Papers from University of Pretoria, Department of Economics

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 andnon-linearityof 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 expendituresuggests that healthcareis 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 suggeststhat healthcareis a necessity good instead. Theimplications of these results for health policy are also discussed.

Keywords: Healthcare expenditure; income elasticity; US states; fractionalintegration; fractionalcointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 H51 I18 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-05
New Economics Papers: this item is included in nep-pbe
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Journal Article: The relationship between healthcare expenditure and disposable personal income in the US states: a fractional integration and cointegration analysis (2018) Downloads
Working Paper: The Relationship between Healthcare Expenditure and Disposable Personal Income in the US States: A Fractional Integration and Cointegration Analysis (2015) Downloads
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