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The Determinants of Health Care Expenditure and Trends: A Semiparametric Panel Data Analysis of OECD Countries

Essays in Honor of Cheng Hsiao

ISBN: 978-1-78973-958-9, eISBN: 978-1-78973-957-2

Publication date: 15 April 2020

Abstract

This chapter re-examines the determinants of health care expenditure (HCE), using a panel of 32 Organization for Economic Cooperation and Development (OECD) countries from 1990 to 2012. In particular, a panel semiparametric technique (i.e., a partially linear model) is employed, with cross-sectional dependence allowed. Beside the study of coefficients, this chapter investigates the trending functions of HCE. After the common and individual trends of HCE are estimated via semiparametric methods, the authors calibrate them with polynomial specifications, leading to out-of-sample forecasting. The validities of the calibration are tested as well. Contrary to those studies that do not take into account time series properties, our finding suggests that medical care is not a luxury commodity. Other determinants, such as public financing, and the supply of doctors, are all positively related to HCE. Moreover, the calibrated trending models perform well in out-of-sample forecasting.

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Acknowledgements

Acknowledgments

This is part of the first author’s Ph.D. thesis, jointly supervised by Professors Jiti Gao and Xueyan Zhao. The authors would like to thank the Guest Editors for their helpful comments, particular with the references suggested by Professor Hashem M. Pesaran. Thanks also go to the Australian Research Council Discovery Grants Program for the financial support under Grant Number: DP170104421.

Citation

Kong, M., Gao, J. and Zhao, X. (2020), "The Determinants of Health Care Expenditure and Trends: A Semiparametric Panel Data Analysis of OECD Countries", Li, T., Pesaran, M.H. and Terrell, D. (Ed.) Essays in Honor of Cheng Hsiao (Advances in Econometrics, Vol. 41), Emerald Publishing Limited, Leeds, pp. 191-216. https://doi.org/10.1108/S0731-905320200000041006

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Emerald Publishing Limited

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