Is health care a necessity or a luxury? Evidence from urban China

This article uses a smooth transition regression (STR) model to research the income elasticity of the health care expenditure of China’s urban residents in the 1990–2013 period. The results demonstrate that if the real income of China’s urban residents that lags a period is taken as a transition variable, urban residents’ health expenditure follows an LSTR1 nonlinear two-regime model. Here, the income elasticity of health care expenditure of China’s urban residents is 1.4919 in 1990–2002 and 1.2216 in 2003–2013. Overall, the income elasticity of health care of China’s urban residents is greater than 1, indicating that health care is a luxury.