Testing the long-run relationship between health expenditures and GDP in the presence of structural change: the case of Spain

Abstract

This article examines the long-run relationship between per capita US$ PPP health expenditures (HE) and per capita US$ PPP national income (GDP), using Spanish data over the period 1960 to 2001. We extend previous analyses by addressing the question of whether this relationship is stable over time, allowing for structural changes at an unknown date. Our empirical results are consistent with the existence of a long-run relationship between both variables, with two structural changes in 1971 and 1991. On the other hand, health would have been characterized as a luxury commodity, even though increasingly less over time.

Acknowledgements

Vicente Esteve acknowledges the financial support of the Spanish Ministry of Science and Technology, project SEC2002-03651.

Notes

¹ See Ng and Perron (2001) and Perron and Ng (1996) for a detailed description of these tests.

² In the case of test, the unit root hypothesis is rejected in favor of station-arity when the estimated value is smaller than some appropiate critical value.

³ Kwiatkowski et al. (1992) statistics for testing the null hypothesis of stationary against the alternative of a unit root.

⁴ See Bai and Perron (1998) for more details.