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Revisiting the health-income nexus in Malaysia: ARDL cointegration and Rao's F-test for causality

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  • Tang, Chor Foon

Abstract

This study re-visits the health-income nexus for Malaysia using alternative econometric techniques which addressed on the small sample problem. This study covers the annual sample period of 1970 to 2009. Based on the appealing small sample properties, we applied the bounds testing approach to cointegration and the system-wise Rao’s F-test with bootstrap simulation procedure in this study. The bounds test suggests that health care expenditure and real income are moving together in the long-run. In addition, the long-run income elasticity is also estimate using four long-run estimators, namely OLS, DOLS, FMOLS, and ARDL. Interestingly, the entire long-run estimators suggest that the long-run income elasticity is more than unity. Therefore, our findings support the health care luxury hypothesis in Malaysia. From policy view point, the system-wise Rao’s F-test reveals strong unilateral causality running from real income to health care expenditure in Malaysia.

Suggested Citation

  • Tang, Chor Foon, 2010. "Revisiting the health-income nexus in Malaysia: ARDL cointegration and Rao's F-test for causality," MPRA Paper 27287, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27287
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    References listed on IDEAS

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    More about this item

    Keywords

    Cointegration; Causality; Health-income nexus; Malaysia; Rao’s F-test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • I10 - Health, Education, and Welfare - - Health - - - General

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