Chapter 1 - International Comparisons of Health Expenditure: Theory, Data and Econometric Analysis*
Section snippets
Background and overview
The growth of health expenditure and of its share in Gross Domestic Product (GDP) is a phenomenon which is constantly the subject of comments and discussions among politicians, administrators and academics in many countries. One approach to this issue has been international comparisons of health expenditure. There are substantial differences in health expenditure across countries, irrespective of how they are measured. This is even true among the relatively homogeneous industrialized market
Cross-section bivariate regressions
The analysis of international health expenditure has to some extent been based on standard demand theory, typically focusing on the income elasticity of health expenditure estimated in functions linking per capita health expenditure (henceforth HE) to per capita GDP (henceforth GDP).
Methods
Panel data [Greene (1993)] enable one to test for country and time-invariant effects and carry out appropriate estimation in their presence. The error term in a typical panel data model is of the form: ɛit + μi + θt, where μ is the country-specific term and θ is the time-specific term. Different ways of modeling these country and time-specific terms give rise to different panel data models. Running a simple least squares (OLS) regression assumes that μi = 0 and θt = 0. A fixed-effects model
Summary and concluding remarks
This chapter has reviewed the literature on international comparisons of health expenditure which has attracted considerable interest inside and outside health economics during the last three decades. One reason for this interest is the large cross-country differences in health expenditure and the opportunity for analyzing institutional arrangements influencing the demand, funding and delivery of health services in different countries. It is intriguing to ask: Does the organization of the
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We are grateful to Martin Chalkley, Tony Culyer, Eddy van Doorslaer, Joe Newhouse, Albert Okunade and Tom Philipson for helpful comments.