Stochastic Pattern of Health Care Spending: Evidence from Nonlinear Panel Data Analysis

Abstract

This paper analyses the stochastic pattern of health care spending for 188 countries around the world which are categorized into four groups based on the World Bank income categories. The main motivation of this article is to evaluate whether the stochastic features of total health care expenditure varies if decomposed into private and public health care consumption. To achieve this goal, in addition to conventional empirical methods, latterly developed panel stationarity approaches are employed for both linear and nonlinear regression processes. Our results demonstrate that allowing for cross-section dependency between series and nonlinearity in the estimation process may lead to more often rejection of the null hypothesis of unit root for all series in panel data set.