Is health care really a luxury?

Area of Science:

• Health Economics
• Econometrics

Background:

• A prevailing view suggests income elasticity of healthcare spending exceeds one.
• This view is largely based on international cross-section and pooled time-series data.

Purpose of the Study:

• To re-examine the income elasticity of healthcare spending.
• To investigate long-run equilibrium relationships in non-stationary time series.

Main Methods:

• Analysis of long-run equilibrium relationships.
• Utilizing non-stationary time series data.
• Accounting for autonomous trends.

Main Results:

• Results question the validity of pooling cross-section and time-series data.
• Evidence casts doubt on the notion that income elasticity of healthcare spending is above one.

Conclusions:

• The common view on healthcare spending elasticity may be unreliable.
• Rethinking the methodology for analyzing healthcare expenditure trends is necessary.