Health Care Expenditure across OECD Countries: A Public Choice Approach

This paper presents a Public Choice model explaining the determinants of public and private health care expenditure for OECD countries. Public expenditure derives from a government supply model while the private counterpart is determined by the demand that the public sector cannot meet. The econometric estimations show that the oil crisis is a powerful factor in explaining health care expenditure and the differences in the observed growth rates. Private expenditure confirms its residual nature, but this effect might be asymmetric, i.e. private provision grows as a consequence of a decrease in the growth of public provision while the contrary is not necessarily true. From a policy point of view, the empirical estimations show that closed-end systems might control expenditure at macro level given the presence of a fixed budget constraint, but they have the effect of pushing expenditure up to its limit.