Income Elasticity Of Health Expenditure Research Articles

Determining the Income Elasticity of Health Expenditure in Sub Sharan

ABSTRACT: The present study adds to the existing literature by grouping countries in sub-Saharan Africa into two broad health systems (public and private). A country's health system is classified as predominantly public if the average share of public health expenditure for the period under study is greater than the average share of private health expenditure; it is classified as predominantly private if the reverse is the case. The aim is to derive the income elasticities of health expenditure in other to unravel countries in the sub region where health provision is likely to be a necessary good. To capture the dynamic nature of the relationship, the study's methodology relies on several econometric procedures (pooled mean group, mean group, and common correlated error mean group estimators). Other variables included in the model are official development assistance, the price level, population above 65 and migrant remittances. The unit root test performed showed that most of the variables in the study are not stationary at level; however, they are cointegrated in the long run, justifying the choice of the estimation techniques. The empirical results reveals that the short run income elasticity of health expenditure in sub-Saharan Africa is 0.36 and in the long run, the value becomes 1.18 with a speed of adjustment of 0.41. This suggest that 41% of the short run disequilibrium is dissipated in the current period. Other variables that were included in the model as controls were not statistically significant. In the reduced model that has only income as regressor, the short run and long run income elasticities in the overall sample continues to remain significant, however, the income elasticity in the predominantly public health system is greater than the elasticity in the predominantly private health system. This suggests that health is more of a development issue in a predominantly private health system in sub–Saharan Africa. An implication of the present study is that citizens of sub-Saharan African countries that rely more on private financing of health expenditure are likely to be exposed to catastrophic health financing. Hence, policymakers can avert this by encouraging more public financing of healthcare provision.

Health expenditure in Botswana: A luxury or a necessity?

ABSTRACT This paper examines the relationship between health expenditure and income in Botswana and its implications for health policy. We employed micro-data drawn from the Household Income and Expenditures Surveys, 1993–94 and 2003–04 and macro-data from 1981 to 2016 to estimate the income elasticity of health expenditure. We estimated the arc-elasticity of private health expenditure, and the short-run and long-run income elasticity of public health expenditure, with control for the impact of technology, structural breaks, and the dynamic aspects of health expenditure. The results from the empirical estimations indicate that the demand for healthcare is a necessity in the short run and especially at the household level in Botswana. Furthermore, our results also establish that non-economic factors such as country-specific epidemiology are critical in explaining income elasticity of health expenditure.

Determining the Income Elasticity of Health Expenditure in Sub Sharan Africa

The present study adds to the existing literature by grouping countries in sub-Saharan Africa into two broad health systems (public and private). A country's health system is classified as predominantly public if the average share of public health expenditure for the period under study is greater than the average share of private health expenditure; it is classified as predominantly private if the reverse is the case. The aim is to derive the income elasticities of health expenditure in other to unravel countries in the sub-region where health provision is likely to be a necessary good. To capture the dynamic nature of the relationship, the study's methodology relies on several econometric procedures (pooled mean group, mean group, and common correlated error mean group estimators). Other variables included in the model are official development assistance, the price level, population above 65 and migrant remittances. The unit root test performed showed that most of the variables in the study are not stationary at level; however, they are cointegrated in the long run, justifying the choice of the estimation techniques. The empirical results reveal that the short-run income elasticity of health expenditure in sub-Saharan Africa is 0.36 and in the long run, the value becomes 1.18 with a speed of adjustment of 0.41. This suggests that 41% of the short-run disequilibrium is dissipated in the current period. Other variables that were included in the model as controls were not statistically significant. In the reduced model that has only income as a regressor, the short-run and long-run income elasticities in the overall sample continue to remain significant, however, the income elasticity in the predominantly public health system is greater than the elasticity in the predominantly private health system. This suggests that health is more of a development issue in a predominantly private health system in sub–Saharan Africa. An implication of the present study is that citizens of sub-Saharan African countries that rely more on private financing of health expenditure are likely to be exposed to catastrophic health financing. Hence, policymakers can avert this by encouraging more public financing of healthcare provisions.

Spending to grow or growing to spend? Relationship between public health expenditure and income of Indian states

While there are concerns about low public health expenditure in most developing countries, the evidence on the linkage between public health expenditure and income is limited. In countries such as India, where massive public health programmes have been implemented over a period that experienced high economic growth, the relationship between two is a question of interest. We examine the relationship between two at sub-national level, as decisions regarding health are prerogative of the state government. We use data on gross state domestic product and public health expenditure over 1981–2017. Using a robust version of Granger causality that produces reliable results even in presence of parameter instabilities, we find presence of non-linear and bi-directional relationship between the two variables. We report inter-state differences in the income elasticity of health expenditure. These differences can be traced to the differing institutional set up, partly rooted in the administrative decisions taken in colonial India.

Health Expenditure and GDP Growth in Botswana

Botswana has always been recognised as an economically stable and upper middle income country in Sub- Sahara Africa, very often celebrated as a model economy for its prudential fiscal management. In 2009 Botswana become one of the few countries which have met the Abuja targets in per capita health expenditure. Amidst a high literacy rate and reasonably high economic growth, health expenditure being the highest among the SADC countries, Botswana has the HIV/AIDS prevalence which is one of the highest in the African continent. A stable relationship between health expenditure growth and income growth is crucial for health policy formulation. Four issues associated with health expenditure in the estimation of income elasticity which have not been adequately addressed in earlier studies are role of technology, heterogeneity of the health expenditure, treatment of structural break and dynamic aspects of health expenditure. This paper attempts to address these issues while estimating the income elasticity of health expenditure for Botswana considering both macro-data for 1981-2016, and micro-data drawn from the Household Income Expenditures Surveys, 1993/94 and 2003/04 according to residence status. Our results for Botswana indicate that the health care is a necessity at least in the short run. This is in contrast to the available evidence for other countries especially among upper middle income and in Africa.

Διερεύνηση της Εισοδηματικής Ελαστικότητας των Δαπανών Υγείας στις Χώρες του ΟΟΣΑ

Introduction: The long-term increase in both health expenditure as a whole and its individual components (hospital, pharmaceutical expense) at rates higher than Gross Domestic Product (GDP) has garnered the interest of the scientific community. At the same time, policies for restraining health expenditure have been adopted internationally. An important tool for establishing health policies is the knowledge and the determination of the income elasticity of health expenditure. Aim: To investigate the income elasticity of health expenditure for OECD countries. Specifically, to review the price of income elasticity of health expenditure cal- culated in international studies conducted over the last decades for OECD countries. Method: A systematic review of papers published up until July 2018 was conducted. Search was performed on PubMed, Medline, Scopus, Science Direct and OECD. The criteria for inclusion in this review, which follows Prisma Checklist guidelines, were the study and calcula- tion of the income elasticity of health expenditure in OECD countries using time-series, cross-sectional data or a combination of them. Results: Only 21 of the scientific papers retrieved met the criteria for inclusion in this review. Twelve of them, using panel data and calculating the income elas- ticity less than one, ranked the health good in normal goods, while the others, using either time-series or cross-sectional data, ranked it in the luxury goods. Conclusions: Earlier studies before 2000, using either cross-sectional or time-series data, led to the con- clusion that health is a luxury asset, while recent stud- ies, using panel data, which is the most reliable method, concluded that health is classified as a normal good.

Health expenditure and gross domestic product: causality analysis by income level.

The empirical findings on the relationship between gross domestic product (GDP) and health expenditure are diverse. The influence of income levels on this causal relationship is unclear. This study examines if the direction of causality and income elasticity of health expenditure varies with income level. It uses the 1995-2014 panel data of 161 countries divided into four income groups. Unit root, cointegration and causality tests were employed to examine the relationship between GDP and health expenditure. Impulse-response functions and forecast-error variance decomposition tests were conducted to measure the responsiveness of health expenditure to changes in GDP. Finally, the common correlated effects mean group method was used to examine the income elasticity of health expenditure. Findings show that no long-term cointegration exists, and the growth in health expenditure and GDP across income levels has a different causal relationship when cross-sectional dependence in the panel is accounted for. About 43% of the variation in global health expenditure growth can be explained by economic growth. Income shocks affect health expenditure of high-income countries more than lower-income countries. Lastly, the income elasticity of health expenditure is less than one for all income levels. Therefore, healthcare is a necessity. In comparison with markets, governments have greater obligation to provide essential health care services. Such results have noticeable policy implications, especially for low-income countries where GDP growth does not cause increased health expenditure.

Universal social pension for elderly individuals in India

PurposePopulation ageing, extended coverage of beneficiaries and rise in benefit levels of a public-funded universal social pension scheme (USPS) for elderly individuals may exert fiscal pressures on India’s General Government. Using accounting frameworks, this paper aims at an assessment of public expenditure requirements of USPS scenarios in the short term and their long-term implications for fiscal sustainability.Design/methodology/approachShort-term public expenditure requirements are quantified for the current pension scheme and proposed USPS scenarios, if pension benefits are adjustable for official poverty line, per capita income, the inflation rate and income elasticity of public pension expenditure. Long-term fiscal sustainability is determined by the methodology of generational accounting.FindingsPublic expenditure requirements for the USPS scenarios are remarkably higher as compared to the current expenditure on the Indira Gandhi National Old Age Pension Scheme (IGNOAPS). Short-term analyses offer economic justifications for an increase in pension benefits either by a single adjustment factor or combined adjustment factors but at a cost of remarkable increase in public expenditure requirements. Long-term analyses show that the IGNOAPS and proposed USPS scenarios are fiscally sustainable but sensitive to five parameters (productivity growth, inflation rate, discount rate, income elasticity public pension expenditure and income elasticity of health expenditure). A policy mix of these parameters leads to fiscal sustainability of the IGNOAPS and proposed USPS scenarios with differential impacts on inter-generational distribution of welfare by tax and transfer adjustments.Research limitations/implicationsApplication of the generational accounting methodology is new for India’s pension economics and may have applicability and relevance for future extensions and analyses of other fiscal policy issues. This paper sets a benchmark for such extensions and applications.Practical implicationsThe analyses and implications offer economic justifications for increase in levels of pension benefits by the current pension scheme and proposed USPS scenarios, introduction of sustainable USPS scenarios under current fiscal policies and choice of design parameters for a fiscally sustainable USPS.Social implicationsSocial pensions have implications for providing income security and livelihood benefits for all elderly civilians in society.Originality/valueThe paper adds to the existing knowledge on economic analyses and fiscal implications of India’s old age pension policies in general and social pension policies in particular. Subject to the comparability of socio-economic structures and pension programmes, the methodology and public policy analyses of this paper may be of relevance and applicability for developing countries in Asia.

Stationarity and Cointegration between Health Care Expenditure and GDP for Jordan

This paper explores the Granger-causality relationship between real GDP per capita and real health care expenditure per capita for Jordan during 1995 through 2013. The findings point out that the dominant type of Granger-causality is unidirectional. Furthermore, income elasticity of health expenditure is less than 1, which means that health care is a necessary good in Jordan. To this end, policies must be aimed at raising national income to improve eventually the well-being of the population.

Robust analysis of the determinants of healthcare expenditure growth: evidence from panel data for low-, middle- and high-income countries.

This paper examines the determinants of healthcare expenditure for low-, middle- and high-income countries, and it quantifies their influences in order to assess policies for achieving universal health coverage. We elaborate two models, a fixed-effect model and the dynamic panel model, to estimate the factors associated with the total health expenditure growth as well as its major components for 167 countries over the period of 1993-2013. The panel data on total health expenditure per capita and its components were taken from the World Development Indicators. Overall, our results showed that total health expenditure per capita is rising in all countries over time as a result of rising incomes. However, our estimates showed that the income elasticity of health expenditure ranged from 0.75 to 0.96 in the fixed-effect static panel model, while in the dynamic panel model, it was smaller and ranged from 0.16 to 0.47. Our empirical findings indicate that development assistance for health reduced government domestic spending on health but increased total government health spending. Our results also indicate that the trend in health expenditure growth is significantly depending with the country's economic development. In addition, out-of-pocket expenditure is powerfully influenced by a country's capacity to increase general government revenues and social insurance contributions. Knowledge of factors associated to health expenditure might help policy makers to make wise judgments, plan health reforms and allocate resources efficiently. Copyright © 2016 John Wiley & Sons, Ltd.

Does intelligence affect health care expenditure? Evidence from a cross-country analysis

Most of the literature on the determinants of health expenditure is focused on the relationship between health care expenditure and income. We investigate the interactive effect of income and intelligence on health expenditure, using data from 172 countries, over the period from 2009 to 2013. The results show that the income elasticity of health expenditure is greater than 1 but only if a nation's level of IQ score beyond a certain threshold (about 95), while for low-IQ nations, health care is a necessity. Moreover, various robustness checks largely support the robustness of our main findings.

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

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.

A multilevel analysis on the determinants of regional health care expenditure: a note

Health care in most countries is a rather "local good" for which the fiscal decentralization theory applies and heterogeneity is the result. In order to address the issue of multijurisdictional health care in estimating income elasticity, we constructed a unique sample using data for 110 regions in eight Organisation for Economic Co-operation and Development (OECD) countries in 1997. We estimated this sample data with a multilevel hierarchical model. In doing this, we tried to identify two sources of random variation: within- and between-country variation. The basic purpose was to find out whether the different relationships between health care spending and the explanatory variables are country specific. We concluded that to take into account the degree of fiscal decentralization within countries in estimating income elasticity of health expenditure proves to be important. Two plausible reasons lie behind this: (a) where there is decentralization to the regions, policies aimed at emulating diversity tend to increase national health care expenditure and (b) without fiscal decentralization, central monitoring of finance tends to reduce regional diversity and therefore decrease national health expenditure. The results of our estimation do seem to validate both these points.

Tests of stationarity and cointegration of health care expenditure and gross domestic product

This study examines the long-run relationship among the per capita private, public, and total health care expenditure and per capita gross domestic product and population growth of Turkey. We find some evidence of multivariate cointegrating relationships among the health care expenditure and gross domestic product, and population growth. We further find a bivariate cointegrating relationship between private health care expenditure and per capita gross domestic product. Accordingly, a 10% increase in gross domestic product would translate into a 21.9% increase in total health care expenditure while controlling population growth. The income elasticity of health expenditure is found to be greater than 1, implying that health care is a luxury good in Turkey. Finally we note that there exists one-way causality running from per capita gross domestic product to various definitions of health care expenses.