An International Comparison of Health Care Expenditure Determinants

In this paper, we estimate a health care demand function for 18 OECD countries for the period 1972-1995. We consider a demand side approach where health expenditure depend on per capita GDP and the relative price of health care. We use panel data unit root and stationarity tests to characterize our data. Then, we test cointegration between our variables with Kao[16] panel data cointegration tests. As we accept cointegration, we compare different estimators (OLS, FMOLS, DOLS). Results give conflicting evidence for the value of health expenditure income elasticity. The least biased estimator gives a value that exceeds unity.