IDEAS home Printed from https://ideas.repec.org/a/spr/anresc/v50y2013i1p203-221.html
   My bibliography  Save this article

Strategic interaction and the determinants of public health expenditures in China: a spatial panel perspective

Author

Listed:
  • Yihua Yu
  • Li Zhang
  • Fanghua Li
  • Xinye Zheng

Abstract

This paper examines determinants of expenditures on public health in China using a panel of 31 Chinese provinces covering the period 1997–2008. In particular, we propose a spatial Durbin panel model with spatial and time-period fixed effects to test whether China’s provinces incorporate the neighbor’s health spending behavior into their own decision making. We mainly find that a provincial government appears to decrease its own health spending as a response to the rise of health spending of its neighboring provinces, supportive of the expenditure externality hypothesis. Important policy implications are drawn. Copyright Springer-Verlag 2013

Suggested Citation

  • Yihua Yu & Li Zhang & Fanghua Li & Xinye Zheng, 2013. "Strategic interaction and the determinants of public health expenditures in China: a spatial panel perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 203-221, February.
  • Handle: RePEc:spr:anresc:v:50:y:2013:i:1:p:203-221
    DOI: 10.1007/s00168-011-0488-7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00168-011-0488-7
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s00168-011-0488-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Revelli, Federico, 2006. "Performance rating and yardstick competition in social service provision," Journal of Public Economics, Elsevier, vol. 90(3), pages 459-475, February.
    3. Dubin, Robin A, 1988. "Estimation of Regression Coefficients in the Presence of Spatially Autocorrelated Error Terms," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 466-474, August.
    4. Pierre‐Yves Crémieux & Marie‐Claude Meilleur & Pierre Ouellette & Patrick Petit & Martin Zelder & Ken Potvin, 2005. "Public and private pharmaceutical spending as determinants of health outcomes in Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 107-116, February.
    5. Kelejian, Harry H. & Prucha, Ingmar R., 2010. "Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances," Journal of Econometrics, Elsevier, vol. 157(1), pages 53-67, July.
    6. VERBELEN Bart, 2006. "Is Taking a Pill a Day Good for Health Expenditures? Evidence from a Cross Section Time Series Analysis of 19 OECD Countries from 1970 – 2000," IRISS Working Paper Series 2006-01, IRISS at CEPS/INSTEAD.
    7. Okunade, Albert A. & Murthy, Vasudeva N. R., 2002. "Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture," Journal of Health Economics, Elsevier, vol. 21(1), pages 147-159, January.
    8. Joan Costa‐Font & Jordi Pons‐Novell, 2007. "Public health expenditure and spatial interactions in a decentralized national health system," Health Economics, John Wiley & Sons, Ltd., vol. 16(3), pages 291-306, March.
    9. Manfred M. Fischer & Arthur Getis (ed.), 2010. "Handbook of Applied Spatial Analysis," Springer Books, Springer, number 978-3-642-03647-7, January.
    10. Harry H. Kelejian & Dennis P. Robinson, 1993. "A Suggested Method Of Estimation For Spatial Interdependent Models With Autocorrelated Errors, And An Application To A County Expenditure Model," Papers in Regional Science, Wiley Blackwell, vol. 72(3), pages 297-312, July.
    11. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    12. Baltagi, Badi H. & Moscone, Francesco, 2010. "Health care expenditure and income in the OECD reconsidered: Evidence from panel data," Economic Modelling, Elsevier, vol. 27(4), pages 804-811, July.
    13. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 3(2), pages 24-43, Summer.
    14. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    15. Charles I. Jones, 2002. "Why Have Health Expenditures as a Share fo GDP Risen So Much?," NBER Working Papers 9325, National Bureau of Economic Research, Inc.
    16. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
    17. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    18. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
    19. repec:rre:publsh:v:39:y:2009:i:3:p:269-86 is not listed on IDEAS
    20. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    21. Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2010. "A Spatial Cliff‐Ord‐Type Model With Heteroskedastic Innovations: Small And Large Sample Results," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 592-614, May.
    22. Jan K. Brueckner, 2003. "Strategic Interaction Among Governments: An Overview of Empirical Studies," International Regional Science Review, , vol. 26(2), pages 175-188, April.
    23. David Cantarero, 2005. "Decentralization and health care expenditure: the Spanish case," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 963-966.
    24. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    25. Ruben Hernandez-Murillo, 2003. "Strategic interaction in tax policies among states," Review, Federal Reserve Bank of St. Louis, vol. 85(May), pages 47-56.
    26. J. Paul Elhorst & Sandy Fréret, 2009. "Evidence Of Political Yardstick Competition In France Using A Two‐Regime Spatial Durbin Model With Fixed Effects," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 931-951, December.
    27. Sole Olle, Albert, 2003. "Electoral accountability and tax mimicking: the effects of electoral margins, coalition government, and ideology," European Journal of Political Economy, Elsevier, vol. 19(4), pages 685-713, November.
    28. David Prieto & Santiago Lago-Peñas, 2012. "Decomposing the determinants of health care expenditure: the case of Spain," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(1), pages 19-27, February.
    29. Tauhidur Rahman, 2008. "Determinants of public health expenditure: some evidence from Indian states," Applied Economics Letters, Taylor & Francis Journals, vol. 15(11), pages 853-857.
    30. Parkin, David & McGuire, Alistair & Yule, Brian, 1987. "Aggregate health care expenditures and national income : Is health care a luxury good?," Journal of Health Economics, Elsevier, vol. 6(2), pages 109-127, June.
    31. Moscone, Francesco & Knapp, Martin & Tosetti, Elisa, 2007. "Mental health expenditure in England: A spatial panel approach," Journal of Health Economics, Elsevier, vol. 26(4), pages 842-864, July.
    32. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    33. Joseph P. Newhouse, 1977. "Medical-Care Expenditure: A Cross-National Survey," Journal of Human Resources, University of Wisconsin Press, vol. 12(1), pages 115-125.
    34. repec:rre:publsh:v:33:y:2003:i:2:p:121-41 is not listed on IDEAS
    35. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    36. Thomas Garrett & Gary Wagner & David Wheelock, 2007. "Regional disparities in the spatial correlation of state income growth, 1977–2002," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(3), pages 601-618, September.
    37. Case, Anne, 1992. "Neighborhood influence and technological change," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 491-508, September.
    38. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 1-37.
    39. Baicker, Katherine, 2005. "The spillover effects of state spending," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 529-544, February.
    40. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 475-492, August.
    41. Gerdtham, Ulf-G. & Sogaard, Jes & Andersson, Fredrik & Jonsson, Bengt, 1992. "An econometric analysis of health care expenditure: A cross-section study of the OECD countries," Journal of Health Economics, Elsevier, vol. 11(1), pages 63-84, May.
    42. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    43. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    44. Di Matteo, Livio & Di Matteo, Rosanna, 1998. "Evidence on the determinants of Canadian provincial government health expenditures: 1965-1991," Journal of Health Economics, Elsevier, vol. 17(2), pages 211-228, April.
    45. Bivand, Roger & Szymanski, Stefan, 1997. "Spatial dependence through local yardstick competition:: theory and testing," Economics Letters, Elsevier, vol. 55(2), pages 257-265, August.
    46. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    47. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
    48. Lee, Lung-fei & Yu, Jihai, 2010. "Some recent developments in spatial panel data models," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 255-271, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Felipa de Mello-Sampayo, 2020. "Spatial Interaction Model for Healthcare Accessibility: What Scale Has to Do with It," Sustainability, MDPI, vol. 12(10), pages 1-19, May.
    2. Olufunmilayo S. Tajudeen & Ibrahim A. Tajudeen & Risikat O. Dauda, 2018. "Quantifying Impacts of Macroeconomic and Non‐economic Factors on Public Health Expenditure: A Structural Time Series Model," African Development Review, African Development Bank, vol. 30(2), pages 200-218, June.
    3. Jülide Yildirim & Nadir Öcal, 2016. "Military expenditures, economic growth and spatial spillovers," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 87-104, February.
    4. Sebastian Langer, 2019. "Expenditure interactions between municipalities and the role of agglomeration forces: a spatial analysis for North Rhine-Westphalia," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 497-527, June.
    5. Kalamov, Zarko & Staal, Klaas, 2023. "Too-big-to-fail in federations?," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    6. Matteo Lippi Bruni & Irene Mammi, 2017. "Spatial effects in hospital expenditures: A district level analysis," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 63-77, September.
    7. Canfei He, 2016. "Economic Transition, Urban Dynamics, and Economic Development in China: An Introduction to the Special Issue," Growth and Change, Wiley Blackwell, vol. 47(1), pages 4-8, March.
    8. Hui Jin & Xinyi Qian, 2020. "How the Chinese Government Has Done with Public Health from the Perspective of the Evaluation and Comparison about Public-Health Expenditure," IJERPH, MDPI, vol. 17(24), pages 1-16, December.
    9. Sebastien Bourdin & Sevgi Eda Tuzcu & Esra Satıcı, 2023. "Explaining COVID‐19 vaccine uptake: A spatial sociodemographic study in Turkey," Papers in Regional Science, Wiley Blackwell, vol. 102(2), pages 307-329, April.
    10. Xinye Zheng & Feng Song & Yihua Yu & Shunfeng Song, 2015. "In Search of Fiscal Interactions: A Spatial Analysis of Chinese Provincial Infrastructure Spending," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 860-876, November.
    11. Wanshu Wu & Ziying Ma & Jinhan Guo & Xinyi Niu & Kai Zhao, 2022. "Evaluating the Effects of Built Environment on Street Vitality at the City Level: An Empirical Research Based on Spatial Panel Durbin Model," IJERPH, MDPI, vol. 19(3), pages 1-24, January.
    12. Massimiliano Agovino & Giuliana Parodi, 2015. "Human Development and the Determinants of the Incidence of Civilian Disability Pensions in Italy: A Spatial Panel Perspective," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 122(2), pages 553-576, June.
    13. Jamiil Jeetoo, 2020. "Spillover effects in public healthcare expenditure in Sub‐Saharan Africa: A spatial panel analysis," African Development Review, African Development Bank, vol. 32(2), pages 257-268, June.
    14. Marcelo Castro & Enlinson Mattos & Fernanda Patriota, 2021. "The effects of health spending on the propagation of infectious diseases," Health Economics, John Wiley & Sons, Ltd., vol. 30(10), pages 2323-2344, September.
    15. Dũng Tuấn Nguyễn & Takeshi Miyazaki, 2023. "Strategic interaction among Japanese municipalities regarding public servant salary levels," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 71(2), pages 463-485, October.
    16. Arfat Ahmad Sofi & Subash Sasidharan, 2018. "Do Indian States Mimic, Compete or Interact in Local Public Spending? A Spatial Econometric Analysis," Asian Economic Journal, East Asian Economic Association, vol. 32(2), pages 187-213, June.
    17. Dechun Liu & Xinye Zheng & Yihua Yu, 2022. "Public Debt Competition in Local China: Evidence and Mechanism of Spatial Interactions," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(S2), pages 91-105, November.
    18. Shulin Wan & Weixin Luan & Qiaoqiao Lin, 2021. "Industry linkage, spatial correlation, and city exports: case study of the textile and clothing export industry in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 91-112, February.
    19. Jorge Ferreira & Alexandre Alves & Emilie Caldeira, 2016. "Elections and externalities of health expenditures: Spatial patterns and opportunism in the local budget allocation," ERSA conference papers ersa16p933, European Regional Science Association.
    20. Wang, Jian & Wu, Qun & Yan, Siqi & Guo, Guancheng & Peng, Shangui, 2020. "China’s local governments breaking the land use planning quota: A strategic interaction perspective," Land Use Policy, Elsevier, vol. 92(C).
    21. Cong Yu & Linke Hou & Yuxia Lyu & Qi Zhang, 2022. "Political competition, spatial interactions, and default risk of local government debts in China," Papers in Regional Science, Wiley Blackwell, vol. 101(3), pages 717-743, June.
    22. Zheng, Xinye & Wang, Jing & Li, Xilu & Yu, Yihua, 2013. "On the supply of China's healthcare resources in a decentralized healthcare system," MPRA Paper 56030, University Library of Munich, Germany.
    23. Xu Lin & Lizi Wu, 2021. "Interdependence among mental health care providers: evidence from a spatial dynamic panel data model with interactive fixed effects," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(1), pages 131-165, August.
    24. Nakazawa, Katsuyoshi & Matsuoka, Hirokazu, 2016. "Change in Strategic Interaction after Introducing Policy," MPRA Paper 73512, University Library of Munich, Germany.
    25. Soyoung Park & Sungchan Kim, 2023. "Does fiscal decentralization affect local governments' strategic behaviours? Evidence from South Korea," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 124-141, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(3), pages 393-423, June.
    2. Geys, Benny, 2006. "Looking across borders: A test of spatial policy interdependence using local government efficiency ratings," Journal of Urban Economics, Elsevier, vol. 60(3), pages 443-462, November.
    3. Yihua Yu & Jing Wang & Xi Tian, 2016. "Identifying the Flypaper Effect in the Presence of Spatial Dependence: Evidence from Education in China's Counties," Growth and Change, Wiley Blackwell, vol. 47(1), pages 93-110, March.
    4. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 475-492, August.
    5. Cassette, Aurélie & Paty, Sonia, 2008. "Tax competition among Eastern and Western European countries: With whom do countries compete?," Economic Systems, Elsevier, vol. 32(4), pages 307-325, December.
    6. Revelli, Federico & Tovmo, Per, 2007. "Revealed yardstick competition: Local government efficiency patterns in Norway," Journal of Urban Economics, Elsevier, vol. 62(1), pages 121-134, July.
    7. Borck, Rainald & Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2015. "Race to the debt trap? — Spatial econometric evidence on debt in German municipalities," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 20-37.
    8. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, vol. 23(4), pages 878-897.
    9. Sebastian Langer, 2019. "Expenditure interactions between municipalities and the role of agglomeration forces: a spatial analysis for North Rhine-Westphalia," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 497-527, June.
    10. David Bartolini & Raffaella Santolini, 2012. "Political yardstick competition among Italian municipalities on spending decisions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(1), pages 213-235, August.
    11. Zheng, Xinye & Li, Fanghua & Song, Shunfeng & Yu, Yihua, 2013. "Central government's infrastructure investment across Chinese regions: A dynamic spatial panel data approach," China Economic Review, Elsevier, vol. 27(C), pages 264-276.
    12. Mohanty, Biswajit & Bhanumurthy, N. R. & Dastidar, Ananya Ghosh, 2017. "What explains Regional Imbalances in Infrastructure?: Evidence from Indian States," Working Papers 17/197, National Institute of Public Finance and Policy.
    13. Nakazawa, Katsuyoshi & Matsuoka, Hirokazu, 2016. "Change in Strategic Interaction after Introducing Policy," MPRA Paper 73512, University Library of Munich, Germany.
    14. Barbara ERMINI & Raffaella SANTOLINI, 2007. "Horizontal Interaction on Local Councils' Expenditures. Evidence from Italy," Working Papers 278, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    15. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    16. Quentin Frère & Matthieu Leprince & Sonia Paty, 2014. "The Impact of Intermunicipal Cooperation on Local Public Spending," Urban Studies, Urban Studies Journal Limited, vol. 51(8), pages 1741-1760, June.
    17. Yu, Jihai & Zhou, Li-An & Zhu, Guozhong, 2016. "Strategic interaction in political competition: Evidence from spatial effects across Chinese cities," Regional Science and Urban Economics, Elsevier, vol. 57(C), pages 23-37.
    18. Cassette, Aurélie & Creel, Jérôme & Farvaque, Etienne & Paty, Sonia, 2013. "Governments under influence: Country interactions in discretionary fiscal policy," Economic Modelling, Elsevier, vol. 30(C), pages 79-89.
    19. Francisco J. Delgado & Santiago Lago-Peñas & Matías Mayor, 2015. "On The Determinants Of Local Tax Rates: New Evidence From Spain," Contemporary Economic Policy, Western Economic Association International, vol. 33(2), pages 351-368, April.
    20. Feld Lars P. & Reulier Emmanuelle, 2009. "Strategic Tax Competition in Switzerland: Evidence from a Panel of the Swiss Cantons," German Economic Review, De Gruyter, vol. 10(1), pages 91-114, February.

    More about this item

    Keywords

    I10; H7; C23;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:anresc:v:50:y:2013:i:1:p:203-221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.