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Empirical Economics

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20-09-2021

Exploring the technology–healthcare expenditure nexus: a panel error correction approach

Authors: Elisabet Rodriguez Llorian, Janelle Mann

Published in: Empirical Economics | Issue 6/2022

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Abstract

Technology is perceived as a key factor driving the increase in per capita healthcare expenditure. We assess this effect between 1981 and 2019 for a panel of OECD member countries using a panel error correction model, which was estimated using the dynamic common correlated effect approach of Chudik and Pesaran (J Econom 188(2):393–420, 2015). 10.1016/j.jeconom.2015.03.007. Results corroborate previous findings that medical technology and healthcare expenditure follow a long-run relationship. Incorporating heterogeneity and controlling for cross-sectional dependence and endogeneity reveals substantial variation in medical technology’s effect across OECD member countries. Overall, medical technology is a key factor in driving the increase in per capita healthcare expenditure for less than half of the panel of OECD member countries. This finding is consistent across three different technology proxies and suggests that policymakers should utilize country-specific coefficients to inform decisions.

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Government financing is commonly termed public or compulsory, and the portion paid by the patient is commonly termed private, out-of-pocket, or voluntary.

We gratefully acknowledge the discovery of this proxy through interdisciplinary dialogue with Dr. Tyler Grant, who is the Director of Engineering at Lyndra Therapeutics Inc. and previously a postdoctoral fellow at Langer Lab at MIT.

Note that for CTR, one of the proxies included under \(\mathrm{TECH}\), the subscript i is redundant since CTR is common across units of analysis.

When the medical technology proxy is common for all units in the panel (CTR), these units should be considered as an observed common factor in our model (as opposed to the cross-sectional averages of all other model variables, which capture unobserved common factors).

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Title: Exploring the technology–healthcare expenditure nexus: a panel error correction approach
Authors: Elisabet Rodriguez Llorian
Janelle Mann
Publication date: 20-09-2021
Publisher: Springer Berlin Heidelberg
Published in: Empirical Economics / Issue 6/2022
Print ISSN: 0377-7332
Electronic ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-021-02125-0

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