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Wasted windfalls: Inefficiencies in health care spending in oil rich countries

Michael Keller

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: This paper uses Stochastic Frontier Analysis (SFA) to determine whether oil rents drive inefficiency in the healthcare sector. SFA simultaneously estimates a production function for health outputs and the determinants of inefficiency in production. Using a sample of 119 countries covering the period 2000 to 2015, unexpectedly high oil revenues are shown to increase inefficiency. Oil rents hinder countries in reaching their potential life expectancy. Exploiting exogenous variation in the international oil price reveals that causality runs from oil rents to inefficiency. The effect varies with institutions, sex and age. The effect is more pronounced in democracies, and women and children are affected more. Transparency and inequality are potential mechanisms.

Keywords: Oil windfalls; health expenditure; stochastic frontier analysis (search for similar items in EconPapers)
JEL-codes: H51 I15 Q33 Q38 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-eff, nep-ene and nep-hea
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