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.     

Variation in Health Expenditures: Is It Just Income or other Factors? Empirical Investigation Using a Panel of Indian States

The primary query of this paper centres on the role played by income in determining the extent of fund allocated by Indian states for improvement of health of its population. Drawing data from the fourteen major states of India over a time span of twenty-three financial years (1974–75 to 1996–97) and using recent advances in panel data time series econometrics, this paper documents the presence of a long run relationship between income and health expenditure. The long-run elasticity estimates reiterate that publicly provided health services should be considered as “necessities”. Results the panel error correction model demonstrate that ageing of the population and proportion of rural population are the only non-income factors, which exert a significant positive impact on real per capita health expenditure. This is particularly important given the demographic transition that India is passing through.

     

The cyclical response of employment to output changes: United States manufacturing industries, 1948 to 1983

This paper provides new evidence on the income elasticity of health care by combining stationarity and cointegration tests of health care expenditure and incomes with estimates of the cointegrating relationship between them. A recently updated dataset of health care expenditures and disposable personal income for the US states for the years 1966–1998 is used. The principal findings are that health care expenditures and incomes at the state level are non-stationary and cointegrated. Dynamic OLS cointegrating regressions of the pooled state time series estimate the income elasticity of health care at 0.817 to 0.844, well below unity, confirming that health care expenditure, even at the aggregate level, is a necessity good.     

Is Post-Communist Health Spending Unusual?

What factors determine a country's spending on health? And what factors determine the share of spending financed by the public sector? Taking these factors into account, is post-communist health spending unusual? For the OECD economies, we find that per capita health spending is strongly related to per capita income, with an elasticity of about 1.5. The elasticity for developing economies is close to one. Spending is also positively related to the elderly dependency rate, but the relationship is weaker than a static comparison of spending by the elderly and non-elderly would suggest. Even though health spending as a share of GDP in the post-communist countries of eastern and central Europe is below the OECD average, there is evidence of above normal health spending in most countries when we control for income and demographics. For Hungary, the ‘excess’ spending reached over three percentage points of GDP in 1994. For the OECD sample, four development indicators account for half the variation in the public sector share of total health spending. Political variables help explain the remainder. If the post-communist countries converge to the market economy pattern, the share of public financing will fall, yet still remain well above half.     

DO TAX AND EXPENDITURE LIMITATIONS AFFECT THE SIZE AND GROWTH OF STATE GOVERNMENT?

This paper focuses on citizens' ability to restrict the size and growth of state government through the use of tax and expenditure limitations (TELs). Most TEL laws are not designed to stop public sector growth but are intended to cap it relative to personal income growth. Evidence indicates that the design of TEL laws increases the elasticity of government size (and growth) with respect to income. Thus, TEL laws, as they currently are written, allow states with high income growth to keep increasing the size of the public sector. Meanwhile, they prevent states with low income growth from doing likewise. While TELs restrict government size and growth in states with below average income, in general they have no significant effect on the size or growth of government. Therefore, as long as income growth is high, TELs end up as little more than political cover for state legislatures.     

Piketty’s Elasticity of Substitution: A Critique

This article examines Thomas Piketty’s explanation of a falling wage share. Piketty explains rising income inequality between labor and capital as a result of one parameter of a production function: an elasticity of substitution, σ, between labor and capital greater than one. This article reviews Piketty’s elasticity argument, which relies on a non-standard definition of capital. In light of the theory of land rent, it discusses why the non-standard capital definition is a measure of wealth, not capital and is problematic for estimating elasticities. It then presents simple long-run estimates of σ in constant elasticity of substitution functions for Piketty’s data as well as for a subset of his capital measure that comes closer to the standard definition of productive capital. The estimation results cast doubt on Piketty’s hypothesis that σ is greater than one.     

Tax structure and public sector growth

It has been hypothesized that a jurisdiction's tax structure exerts an indipendent effect upon the growth of its public sector. We test this hypothesis by examining the relationship between the growth of state general expenditure and the elasticity of tax revenues with respect to income. The work takes advantage of a very careful set of income elasticities for the personal income and sales tax systems for each state, for every year from 1978 to 1983. The main conclusion is that the data do not support the notion that the form of the tax structure exerts an independent effect on public sector growth.     

The determinants of health care expenditure in Australia

The objective of this article is to examine the long-run relationship and short-run dynamics of the health care expenditure in Australia during the period 1960–2003. Consistent with the conventional findings, the income elasticity for health care is found to be greater than one, suggesting that health care is a luxury good in Australia. Demographic structure is found to exert a significant positive impact on health care expenditure. An increase in the accessibility to health care services is associated with higher per capita real health care expenditure. Finally, public funding of health care appears to have a contributory effect on the formation of health care expenditure in Australia.     

Is social protection a necessity or a luxury good? New multivariate cointegration panel data results

The aim of this paper is to test the claim that social protection is a luxury good. Therefore, GDP elasticity of selected social protection expenditure is estimated using a new econometric approach developed first by Kao and Chiang (Advances in Econometrics, 15, 179–222, 2000). Time series properties of selected social expenditure in 18 OECD countries from 1981 to 1998 are examined. Using panel data cointegration tests and OLS, FMOLS and DOLS estimators, results were found which differ from previous analyses reporting substantially higher income elasticities. With the FMOLS, selected social expenditure has income elasticities smaller than one but greater than one with the DOLS. It is noteworthy that whether selected social expenditure is stationary or nonstationary may have critical implications for researchers and policy makers desiring to model and explain the impact of this expenditure on a country economic system.     

Firm turnover,restructuring and labour productivity in transition: the case of Poland

Many studies have found strong and positive relationship between per capita income and health care expenditure. These studies usually adopt the assumptions that (1) the relationships among the variables are constant; and/or (2) the supply-side market for health care could be treated by using standard demand functions models. To take into account of the supply side of health care, we use the demand and supply approach with the cointegration model to re-examine this issue. By using Taiwan health care expenditure data, our results show that the real income elasticity is smaller than unity and the health care expenditures are primarily for ‘curing’ rather than ‘caring’.     

The impact of public R&D investments on patenting activity: technology transfer at the U.S. Environmental Protection Agency

ABSTRACT

This paper presents estimates of the impact of public R&D on patenting activity at the U.S. Environmental Protection Agency (EPA). Using a time series of public sector agency data, we estimate the per-capita R&D elasticity of new patent applications using a knowledge production function framework model that is an expanded version of what other scholars have used with private sector data. New patent applications are an important step in the technology transfer activities of a federal agency. We estimate this elasticity to be about 2.0. This elasticity value represents an initial estimate of the impact of EPA’s R&D investments on its technology transfer activity.     

THE HISTORY OF THE UNITED STATES NATIONAL INCOME AND PRODUCT ACCOUNTS: THE DEVELOPMENT OF AN ANALYTICAL TOOL*

The purpose of this article is to record the history of the national income and product accounts of the United States, concentrating on the period 1932–47. During that period the single national income aggregate evolved into a set of accounts and the estimates emerged as an important analytical tool. Interviews with participants in these developments were extensively utilized to trace the events, people, ideas, and other factors which shaped the history of the accounts. The generally recognized need for economic information during the Great Depression stimulated the request that the Department of Commerce undertake what became the first official continuing series on national income in the United States. These estimates were prepared with the cooperation of the National Bureau of Economic Research and were published in 1934. By the late 1930's, estimates were extended to include income by state and a monthly series. World War II was the impetus for the development of product, or expenditure, estimates. By the mid-1940's, the estimates had evolved into a set of income and product accounts–a consolidated production account, sector income and outlay accounts, and a consolidated saving-investment account–designed to provide a bird's-eye-view of the economy. During this period uses of the accounts widened; analysis of wartime production goals and anti-inflation policy are noteworthy examples. The National Income, 1947 Edition was the culmination of a period of intensive conceptual discussion, extension of data sources, and improvement of estimating techniques. Thereafter the mainlines of development are more familiar, encompassing refinement and elaboration of the estimates and proliferation of uses.     

Electricity Tariff Changes and Consumer Sentiment on Household Consumption Expenditure in Malaysia

Purpose

This study investigates the impact of the current electricity tariff, represented by optimized tariff calculation, on Malaysian household’s consumption across different levels of income.

Design/methodology/approach

The input-output (IO) model has vastly been used in many energy economics literature that presented the matrix of production between various sectors in an economy. This study aggregated the 124 subsectors in IO Price Table 2015 into 12 groups of consumption of goods and services based on Household Expenditure Survey 2019 (HES 2019) to meet the study’ objectives.

Findings

This study found that in all simulations, high-income earners would be highly affected by the tariff changes. The lower the increment level in electricity tariff rate, the lower the magnitude would be on the changes of household expenditure level.

Research limitations/implications

Optimization in electricity tariff consumptions can pattern the Malaysian household’s consumption across different levels of income efficiently.

Practical implications

Useful to all consumer in the Malaysia economic business sector to predict their energy consumption up to optimum level.

Social implications

The study’s findings can benefit the society in optimiza their electricity consumption since everyone requires the energy for basic needs in their life.

     

Is health care a luxury? The debate revisited with new evidence from emerging economies

This paper studies the long-run relationship between health care expenditure and income using a panel data set of emerging economies over the period 1995–2012. The results show that expenditure on health care and income are non-stationary and cointegrated. After controlling for cross-sectional dependence and unobserved heterogeneity among different countries, we find that the income elasticity of health care is less than 1, indicating that health care is a necessity and not a luxury. Government expenditure and out-of-pocket expenditure turn out to be important determinants of health care expenditure. Among non-monetary factors, results show that old age dependency and female education seem to have significant bearings on health care expenditures. Policy recommendations suggest that government should increase spending on health care in emerging economies since higher incomes may not automatically translate into higher health care spending by the people of these countries.     

A system of equations model of UK tourism demand in neighbouring countries

This paper uses a system of equations model to examine tourism demand during periods of destination country transition and integration into the wider international community. The Almost Ideal Demand System model is applied to the UK demand for tourism in the neighbouring destinations, France, Spain and Portugal. Spain and Portugal are interesting cases as, during the period under consideration, they experienced a process of transition from economies with characteristics typical of developing countries, only entering the World Bank's industrialized countries classification in the 1980s. The paper examines the evolution of tourism demand during these countries' transition from ‘developing’ to ‘developed’ status. Consideration of France as a neighbouring destination also allows the behaviour of tourism demand to be compared between relatively rich and poor countries. The results show the extent to which the cross-country behaviour of demand becomes more or less similar over time with respect to changes in expenditure and effective prices. The expenditure elasticities are greater for Spain than France during the initial period, indicating that tourism can assist countries to ‘catch-up’ with their richer neighbours. However, this outcome is not always the case and may not persist, as Portugal had a low initial expenditure elasticity and Spain's relatively high expenditure elasticity decreased over time. Destinations' sensitivity to changes in their own and competitors' prices can also change over time, as indicated by the increases in the own- and cross-price elasticities for Spain, compared with the decreases for France and Portugal. The cross-price elasticity estimates indicate substitutability between the immediate neighbours, Portugal and Spain, and France and Spain.     

Intertemporal substitution in import demand and the role of habit formation: an application of Euler equation approach for Pakistan

Introduction

The study examines the importance of intertemporal substitution in import demand considering the role of habit formation. A two-goods version of the permanent income model is used in which time-non-separability in consumers’s preferences is assumed. The model is estimated using annual data for Pakistan at disaggregated level covering the period from 1977 to 2017.

Objectives

The objective of the study is to estimate elasticities of substitution along with parameters of habit formation for consumption goods at a disaggregated level.

Method

The study employs co-integration for the estimation of parameters of elasticities of substitution and generalized method of moments (GMM) for the estimation of the parameters of habit formation from Euler equations.

Findings

The estimates of intertempral elasticity of substitution suggest that the nature of commodity group (necessity/luxury) plays an important role when consumers are making intertemporal choices. Moreover, the study finds that intratemporal elasticity of substitution is larger than intertempral elasticity of substitution in almost all cases in Pakistan, suggesting that imported and domestic goods are best described as substitutes in Edgeworth-Pareto sense. In addition, the inclusion of habit formation delivers results with plausible signs and the habit formation process seems significant for certain commodity groups including tea, beverages, tobacco products and drugs.

Conclusion

The study concludes that there is a possibility of crowding out effect on domestic consumption and the depreciation of local currency may improve Pakistan’s balance of trade.

     

Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates

Recently, a voluminous literature estimating the taxable income elasticity has emerged as an important field in empirical public economics. However, to a large extent it is still unknown how the hourly wage rate, an important component of taxable income, reacts to changes in marginal tax rates. In this study we use a rich panel data set and a sequence of tax reforms that took place in Sweden during the 1980s to estimate the elasticity of the hourly wage rate as well as the taxable labor income elasticity with respect to the net-of-tax rate. We also estimate elasticities with respect to the non-labor income in a way that is novel in the literature. While carefully accounting for the endogeneity of marginal tax rates we find a statistically significant response in wage rates both among married men and women. The estimates of the hourly wage rate elasticity with respect to the net-of-tax rate fall in the range of 0.14–0.16 for males and 0.41–0.57 for females, whereas the corresponding taxable labor income elasticity estimates hover between 0.19–0.21 for males and 0.96–1.44 for women. Moreover, for men we find that the taxable labor income elasticity with respect to non-labor income is statistically significant; the point estimate being ? 0.07. This implies that the compensated taxable labor income elasticity is about 5 percentage points higher than the uncompensated one. In general, we consider the estimates for males to be more certain and robust than the estimates for females.     

On the relationship between GDP and health care expenditure: A new look

In this paper we analyze the relationship between income and health expenditure in 31 Organization for Economic Cooperation and Development (OECD) countries. We focus on the differences between short and long term elasticities and we also check the adjustment process of health care expenditure to changes in per capita Gross Domestic Product (GDP) and its cyclical and trend components. In both cases, we test if results differ in countries with a higher share of private expenditure on total health expenditure. Econometric results show that the long-run income elasticity is close to unity, that health expenditure is more sensitive to per capita income cyclical movements than to trend movements, and that the adjustment to income changes in those countries with a higher share of private health expenditure over total expenditure is faster.     

The political economy of public health expenditure and wait times in a public‐private mixed health care system

Abstract This paper investigates the determinants of public health expenditure in a public‐private mixed health care system, where a longer wait time for public care is the major difference between public and private sectors. Voter preferences for health care vary according to their age and by income, and public policy choices are part of a multi‐dimensional, competitive political equilibrium. We show how equilibrium public health expenditure and wait times depend on demographics and explain why they are independent of the distributions of income and political influence. We also show that population aging may not always lead to more public health expenditure.     

Testing for structural breaks in panel varying coefficient models: with an application to OECD health expenditure

In this article, we propose a model selection approach for testing structural breaks in a semiparametric panel varying coefficient model. Monte Carlo evidence shows that the proposed model selection approach performs well in finite sample settings. Applying the method to an empirical data, we find evidence of structural breaks in Organisation for Economic Co-operation and Development (OECD) health expenditure data by allowing for income elasticity to be state (income)-dependent. The relationship between health expenditure and income is subject to two types of structural changes: smooth changes over income and structural breaks in the time dimension. The findings hold for both foreign exchange rate-converted and Purchasing Power Parity-converted expenditure and GDP.