The determinants of Canadian provincial health expenditures: evidence from a dynamic panel

Abstract

This article seeks to reveal the magnitude of the income elasticity of health expenditure and the impact of non income determinants of health expenditure across Canada. For this purpose, panel data on gross domestic product, the relative price of health care, the share of publicly funded health expenditure, the share of senior population and the life expectancy at birth have been used to investigate the determinants of Canadian provincial health expenditures over a 28 year period. Dynamic models of health expenditure are analysed via Generalized Instrumental Variables (GIV) and Generalized Method of Moments (GMM). Results indicate that the long run income elasticity of health expenditure is substantially lower than one. Thus, health care is far from being a luxury in Canada.