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Is health care really a luxury in OECD countries? Evidence from alternative price deflators

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  • Paresh Kumar Narayan
  • Seema Narayan
  • Russell Smyth

Abstract

This article examines whether real Health-care Expenditure (HE) is a luxury or necessity for Organization for Economic Co-operation and Development (OECD) countries over the period 1972 to 2004 within a panel unit root and panel cointegration framework. To realize this objective, we regress HE on real Gross Domestic Product (GDP), the proportion of the population aged over 65 (P65) and a time trend (T). We first present results for 18 countries where real HE per capita is obtained using a general GDP deflator. For these countries, we find that health care is a luxury for just one country. Next, we present results for eight countries where real HE is obtained using a specific health-care price index. When the general GDP deflator is replaced with a specific health-care price index, at least one of the GDP, P65 or T coefficients for the eight countries changes in a reasonably dramatic fashion, suggesting that the use of the GDP deflator introduces bias into the regression. We find that HE is a necessity in all eight countries. Given that the reliability of the GDP deflator results is questionable, on the basis of the results for the eight countries, we conclude that HE is a necessity.

Suggested Citation

  • Paresh Kumar Narayan & Seema Narayan & Russell Smyth, 2011. "Is health care really a luxury in OECD countries? Evidence from alternative price deflators," Applied Economics, Taylor & Francis Journals, vol. 43(25), pages 3631-3643.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:25:p:3631-3643
    DOI: 10.1080/00036841003670788
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    Cited by:

    1. Sasa Obradovic & Nemanja Lojanica, 2018. "Is Health Care Necessity or Luxury Good? Panel Data Analysis on the Example of the SEEHN Countries," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 16(3 (Fall)), pages 195-214.
    2. Nicholas Apergis & Tsangyao Chang & Christina Christou & Rangan Gupta, 2017. "Convergence of Health Care Expenditures Across the US States: A Reconsideration," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 303-316, August.
    3. Ousmane Traoré, 2020. "Economic Growth and Human Capital Accumulation across Countries: Evidence from WAEMU Region," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(2), pages 147-159, May.
    4. Ali Akbar Fazaeli & Hossein Ghaderi & Masoud Salehi & Ali Reza Fazaeli, 2016. "Health Care Expenditure and GDP in Oil Exporting Countries: Evidence From OPEC Data, 1995-2012," Global Journal of Health Science, Canadian Center of Science and Education, vol. 8(2), pages 1-93, February.
    5. Nor Aziah Abd Kadir & Nur Fakhzan Marwan & Adibah Hussin & Rosmah Nizam & Fazreena Mansor, 2022. "Long Run Analysis between Climate Change, Socio-Economic Factors and Technology on Health Expenditure in Malaysia," International Journal of Human Resource Studies, Macrothink Institute, vol. 12(2), pages 6589-6589, December.
    6. Alejandro F. Rodríguez & M. Nieves Valdés, 2019. "Health care expenditures and GDP in Latin American and OECD countries: a comparison using a panel cointegration approach," International Journal of Health Economics and Management, Springer, vol. 19(2), pages 115-153, June.
    7. Muhammad Arshad Khan & Muhammad Iftikhar Ul Husnain, 2019. "Is health care a luxury or necessity good? Evidence from Asian countries," International Journal of Health Economics and Management, Springer, vol. 19(2), pages 213-233, June.

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