Health expenditure and income in the United States.
This paper investigates the long-run economic relationship between health care expenditure and income in the US at a State level. Using a panel of 49 US States over the period 1980-2004, we study the non-stationarity and co-integration between health spending and income, ultimately measuring income elasticity of health care. The tests we adopt allow us to explicitly control for cross-section dependence and unobserved heterogeneity. Specifically, in our regression equations we assume that the error has a multifactor structure, which may capture global shocks and local spill overs in health expenditure. Our results suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in other US studies. Further, we detect significant spatial concentration in US health spending. Our broad perspective of cross-section dependence as well as the methods used to capture it give new insights on the debate over the relationship between health spending and income.
Moscone
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F
Brunel Business School, Brunel University, Uxbridge, Middlesex UB8 3PH, UK. francesco.moscone@brunel.ac.uk
Tosetti
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E
D014487:Centers for Medicare and Medicaid Services, U.S. / Q000706:statistics & numerical data; D003430:Cross-Sectional Studies; D005102:Health Expenditures / Q000639:trends*; D006801:Humans; D007182:Income / Q000639:trends*; D017059:Models, Econometric; D012044:Regression Analysis; D014481:United States