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Is Health Care a Necessity or a Luxury? New Evidence from a Panel of U.S. State-Level Data

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  • Donald G. Freeman

    (Department of Economics and International Business, Sam Houston State University)

Abstract

This paper estimates the income elasticity of health care expenditures using annual data on health spending by state in the U.S. from 1966-2009. Panel stationarity tests incorporating structural breaks in the levels and trends in Health Care Expenditures and Disposable Personal Income yield inconsistent results, with stationarity rejected for HCE but not for DPI. Regression results using levels estimation robust to orders of integration differed considerably depending on time period, and the cross-state variation in elasticity estimates was quite large. Results of the first difference models provide more consistent estimates across time periods, whether expressed as averages of individual state estimates or as pooled time series. Income elasticities for the full sample fall in the range 0.21-0.22, below that of recent research.

Suggested Citation

  • Donald G. Freeman, 2012. "Is Health Care a Necessity or a Luxury? New Evidence from a Panel of U.S. State-Level Data," Working Papers 1203, Sam Houston State University, Department of Economics and International Business.
    • Handle: RePEc:shs:wpaper:1203
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    1. repec:diw:diwwpp:dp1486 is not listed on IDEAS
    2. Clemente, Jesús & Lázaro-Alquézar, Angelina & Montañés, Antonio, 2019. "US state health expenditure convergence: A revisited analysis," Economic Modelling, Elsevier, vol. 83(C), pages 210-220.
    3. Nicholas Apergis & Rangan Gupta & Chi Keung Marco Lau & Zinnia Mukherjee, 2016. "An Analysis of the Relationship between U.S. State Level Carbon Dioxide Emissions and Health Care Expenditure," Working Papers 201618, University of Pretoria, Department of Economics.
    4. 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.
    5. Mulatu F. Zerihun & Juncal Cunado & Rangan Gupta, 2017. "Are Health Care Expenditures and Personal Disposable Income Characterised by Asymmetric Behaviour? Evidence from US State-Level Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(2), pages 527-542, March.
    6. Guglielmo Maria Caporale & Juncal Cunado & Luis A. Gil-Alana & Rangan Gupta, 2018. "The relationship between healthcare expenditure and disposable personal income in the US states: a fractional integration and cointegration analysis," Empirical Economics, Springer, vol. 55(3), pages 913-935, November.
    7. Apergis, Nicholas & Gupta, Rangan & Lau, Chi Keung Marco & Mukherjee, Zinnia, 2018. "U.S. state-level carbon dioxide emissions: Does it affect health care expenditure?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 521-530.
    8. Svetlana N. Beilfuss & James A. Thornton, 2016. "Pathways and Hidden Benefits of Healthcare Spending Growth in the U.S," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 363-375, September.

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