Is health care a luxury or a necessity or both? Evidence from Turkey

Abstract

This study investigates the effect of per capita income on per capita health expenditures in Turkey over the period 1975-2007 by using ARDL bounds test approach to the cointegration considering both demand and supply side variables. Since we reject the null hypothesis that there is no cointegration among the series, we estimate long run and short run elasticities. The results show that while income has no effect on health expenditures in the long run, it is a necessity good in the short run that is a 1% increase in per capita income creates an 0.75% increase in per capita health expenditures. On the other hand, by examining the coefficient of demand and supply side variables, we found that average length of stay and number of physicians has negative effect, percentage of older people has positive effect and infant mortality rate has no effect on health expenditures in both short and long runs.