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Health care expenditure inertia in the OECD countries: A heterogeneous analysis

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  • Albert Okunade
  • Chutima Suraratdecha

Abstract

Health care expenditure studies of the Organization for Economic Cooperation and Development (OECD) countries remain important because their findings often suggest cost containment and other policy initiatives. This paper focuses on the compatibility of OECD health data with the “expenditure inertia” (or lagged adjustments) hypothesis, by modeling individual country time‐series data of 21 nations for the 1960–1993 period. Maximum likelihood estimates of the Box–Cox transformation regression models reveal that: (a) the hypothesized impact of health “expenditure inertia” is both pervasive and strong, averaging 0.64 across the countries; (b) the real GDP elasticities of health care expenditures vary widely among the countries and average 0.34 in the short run – implying that health care is a necessity; (c) the long run GDP elasticities are less than 1 in 8 countries, unitary elastic in 8 countries and elastic in 5 countries – suggesting that health care is not universally a necessity or a luxury commodity for the OECD countries; (d) physician‐inducement effects (dis‐inducement in a few countries) are weak, with a mean elasticity estimate of 0.17; and (e) no unique functional form approximation model is globally compatible with the data across the countries. Health care cost containment policy implications of these findings are explored. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Albert Okunade & Chutima Suraratdecha, 2000. "Health care expenditure inertia in the OECD countries: A heterogeneous analysis," Health Care Management Science, Springer, vol. 3(1), pages 31-42, January.
  • Handle: RePEc:kap:hcarem:v:3:y:2000:i:1:p:31-42
    DOI: 10.1023/A:1019020802989
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    Citations

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    Cited by:

    1. Fengping Tian & Jiti Gao & Ke Yang, 2018. "A quantile regression approach to panel data analysis of health‐care expenditure in Organisation for Economic Co‐operation and Development countries," Health Economics, John Wiley & Sons, Ltd., vol. 27(12), pages 1921-1944, December.
    2. Xiaohui You & Albert A. Okunade, 2017. "Income and Technology as Drivers of Australian Healthcare Expenditures," Health Economics, John Wiley & Sons, Ltd., vol. 26(7), pages 853-862, July.
    3. Christine de la Maisonneuve & Rodrigo Moreno‐Serra & Fabrice Murtin & Joaquim Oliveira Martins, 2017. "The Role of Policy and Institutions on Health Spending," Health Economics, John Wiley & Sons, Ltd., vol. 26(7), pages 834-843, July.
    4. Joan Costa‐Font & Marin Gemmill & Gloria Rubert, 2011. "Biases in the healthcare luxury good hypothesis?: a meta‐regression analysis," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 174(1), pages 95-107, January.
    5. Paolo Roffia & Alessandro Bucciol & Sara Hashlamoun, 2023. "Determinants of life expectancy at birth: a longitudinal study on OECD countries," International Journal of Health Economics and Management, Springer, vol. 23(2), pages 189-212, June.
    6. Till Bärnighausen & David E. Bloom, 2009. "Changing Research Perspectives on the Global Health Workforce," NBER Working Papers 15168, National Bureau of Economic Research, Inc.
    7. Mohan, Ramesh & Mirmirani, Sam, 2007. "An Assessment of OECD Health Care System Using Panel Data Analysis," MPRA Paper 6122, University Library of Munich, Germany.
    8. Nilgun Yavuz & Veli Yilanci & Zehra Ozturk, 2013. "Is health care a luxury or a necessity or both? Evidence from Turkey," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(1), pages 5-10, February.
    9. Di Matteo, Livio, 2005. "The macro determinants of health expenditure in the United States and Canada: assessing the impact of income, age distribution and time," Health Policy, Elsevier, vol. 71(1), pages 23-42, January.
    10. Mujaheed Shaikh & Afschin Gandjour, 2019. "Pharmaceutical expenditure and gross domestic product: Evidence of simultaneous effects using a two‐step instrumental variables strategy," Health Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 101-122, January.
    11. Okunade, Albert A. & Suraratdecha, Chutima, 2006. "The pervasiveness of pharmaceutical expenditure inertia in the OECD countries," Social Science & Medicine, Elsevier, vol. 63(1), pages 225-238, July.

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