Access Type

Open Access Dissertation

Date of Award

January 2016

Degree Type

Dissertation

Degree Name

Ph.D.

Department

Economics

First Advisor

Allen C. Goodman

Abstract

In this essay I estimate the elasticity of total healthcare expenditures with respect to gross domestic product. I also address the stationary properties of total healthcare expenditures and gross domestic product, and whether these measures are cointegrated. The empirical exercise uses a sample of African countries so that the estimates can be compared to those that have been made using data on OECD countries. To address the issue of possible endogeneity of GDP in the healthcare expenditure equation, I assume that total healthcare expenditures and gross domestic product are simultaneously determined, and using structural equations, I identify instrumental variables for GDP in the estimation equation.

I find that the income elasticity of healthcare expenditures is significantly less than 1, contrary to studies on OECD countries that have found elasticities at or greater than 1. I confirm that both healthcare expenditure and GDP are nonstationary, and find that these variables are not cointegrated. I decline to make definitive statements on the issue of cointegration because of the short time series I use in the study. On the basis of my findings I note that health care is not homogenous, and I speculate that Africans choose a mix of healthcare products that actually reduce morbidity and mortality, which makes healthcare a necessity. This is in contrast to the OECD countries, where the mix of health care products has a high concentration of medical technology and advance medicines that confer clinical or psychological benefits that have little to do with improving physiological health, and hence is a luxury as has been found in previous studies.

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