Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 258: International Health Expenditure and GDP: New Multivariate Cointegration Panel Data Results

Ulf-G. Gerdtham () and Mickael Löthgren ()
Additional contact information
Ulf-G. Gerdtham: Centre for Health Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Mickael Löthgren: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: In this paper we test for existence of cointegration between health expenditure and GDP using data from 19 OECD countries for the period 1960-1995. Country-by-country and panel results based on the Johansen multivariate likelihood-based inference and a new panel test for cointegration rank are presented. The empirical modelling is based on a bivariate vector error correction model that allows for trending data as well as an intercept and a trend in the cointegrating relation. Given this model, the main result indicates that a cointegrating relation exists between health expenditure and GDP.

Keywords: Cointegration; Heterogeneous dynamic panels; Maximum likelihood

JEL-codes: C12; C22; C23; I10

13 pages, September 21, 1998

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