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Do health expenditures 'catch-up'? Evidence from OECD countries
1Department of Accounting, Finance and Economics, Griffith Business School, Queensland, Australia. p.narayan@griffith.edu.au
Health Economics
|January 24, 2007
Summary
This study investigated health expenditure convergence among several countries and the USA. Despite initial non-convergence findings, advanced tests reveal that health spending in the UK, Canada, Japan, Switzerland, and Spain has converged to US levels.
Area of Science:
- Health Economics
- Econometrics
Background:
- Healthcare spending varies significantly across developed nations.
- Understanding convergence patterns in per capita health expenditures is crucial for economic policy.
Purpose of the Study:
- To test the 'catch-up' hypothesis for per capita health expenditures.
- To determine if countries like the UK, Canada, Japan, Switzerland, and Spain converged to US health spending levels between 1960 and 2000.
Main Methods:
- Developed a framework to analyze health expenditure convergence.
- Employed Lagrange multiplier (LM) unit root tests, including univariate and panel approaches.
- Accounted for up to two structural breaks in the time series data.
Main Results:
- Standard unit root tests without structural breaks did not find evidence of convergence.
- Univariate and panel LM tests incorporating structural breaks demonstrated strong evidence of convergence.
- Per capita health expenditures in the UK, Canada, Japan, Switzerland, and Spain converged towards those of the USA.
Conclusions:
- Structural breaks significantly impact the detection of health expenditure convergence.
- The 'catch-up' hypothesis is supported when accounting for economic shifts.
- Policy implications for international health spending disparities and convergence are highlighted.
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