This paper investigates the long-run economic relationship between health care expenditure and income in the world using data on 167 countries over the period 1995-2012, collected from the World Bank data set. The analysis is carried using panel data methods that allow one to account for unobserved heterogeneity, temporal persistence, and cross-section dependence in the form of either a common factor model or a spatial process. We estimate a global measure of income elasticity using all countries in the sample, and for sub-groups of countries, depending on their geo-political area and income. Our findings suggest that at the global level, health care is a necessity rather than a luxury. However, results vary greatly depending on the sub-sample analyzed. Our findings seem to suggest that size of income elasticity depends on the position of different countries in the global income distribution, with poorer countries showing higher elasticity.

Document Type

Working Paper


Fall 11-2016


Health Expenditure, Panels, Income Elasticity, World, Exploring the Geography of Health




Working Papers Series


Economics | Health Economics | Health Policy | Medicine and Health | Public Affairs, Public Policy and Public Administration



Additional Information

Working paper no. 197

The authors thank Albert Okunade, Thomas Getzen and three anonymous referees for helpful comments. The authors appreciate the feedback received at the session "Medical care expenditure models across countries: What have we learned after almost 40 years?" at the 11th World iHEA Congress.

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Creative Commons Attribution 3.0 License
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