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