Abstract
Health care in most countries is a rather “local good” for which the fiscal decentralization theory applies and heterogeneity is the result. In order to address the issue of multijurisdictional health care in estimating income elasticity, we constructed a unique sample using data for 110 regions in eight Organisation for Economic Co-operation and Development (OECD) countries in 1997. We estimated this sample data with a multilevel hierarchical model. In doing this, we tried to identify two sources of random variation: within- and between-country variation. The basic purpose was to find out whether the different relationships between health care spending and the explanatory variables are country specific. We concluded that to take into account the degree of fiscal decentralization within countries in estimating income elasticity of health expenditure proves to be important. Two plausible reasons lie behind this: (a) where there is decentralization to the regions, policies aimed at emulating diversity tend to increase national health care expenditure and (b) without fiscal decentralization, central monitoring of finance tends to reduce regional diversity and therefore decrease national health expenditure. The results of our estimation do seem to validate both these points.
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Notes
Within the state, differences in prices do not appear relevant enough for further adjustment (other than those considered in their own allocation of revenue formulas), unlike interstate comparisons where levels of technology and purchasing-power-parity (PPP)-adjusted salaries may differ also.
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Acknowledgments
The authors are grateful to the participants of the Third International Conference of the International Health Economics Association, York, July 2001, where a previous version of this paper was presented. Two anonymous referees helped us to improve the paper. The authors would also like to thank D. Casado for research assistance. Usual disclaimers apply. Financial support for this study was provided in part by grants from the CICYT under the project SEC98-0296-C04-02 and the AATRM project 115/28/2000.
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López-Casasnovas, G., Saez, M. A multilevel analysis on the determinants of regional health care expenditure: a note. Eur J Health Econ 8, 59–65 (2007). https://doi.org/10.1007/s10198-006-0007-4
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DOI: https://doi.org/10.1007/s10198-006-0007-4