Tang, Chor Foon (2010): Revisiting the health-income nexus in Malaysia: ARDL cointegration and Rao's F-test for causality.
Download (76kB) | Preview
This study re-visits the health-income nexus for Malaysia using alternative econometric techniques which addressed on the small sample problem. This study covers the annual sample period of 1970 to 2009. Based on the appealing small sample properties, we applied the bounds testing approach to cointegration and the system-wise Rao’s F-test with bootstrap simulation procedure in this study. The bounds test suggests that health care expenditure and real income are moving together in the long-run. In addition, the long-run income elasticity is also estimate using four long-run estimators, namely OLS, DOLS, FMOLS, and ARDL. Interestingly, the entire long-run estimators suggest that the long-run income elasticity is more than unity. Therefore, our findings support the health care luxury hypothesis in Malaysia. From policy view point, the system-wise Rao’s F-test reveals strong unilateral causality running from real income to health care expenditure in Malaysia.
|Item Type:||MPRA Paper|
|Original Title:||Revisiting the health-income nexus in Malaysia: ARDL cointegration and Rao's F-test for causality|
|Keywords:||Cointegration, Causality; Health-income nexus; Malaysia; Rao’s F-test|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
I - Health, Education, and Welfare > I1 - Health > I10 - General
|Depositing User:||Chor Foon Tang|
|Date Deposited:||08. Dec 2010 23:18|
|Last Modified:||30. Dec 2015 20:14|
Blomqvist, Å.G. and Carter, R.A.L. (1997) Is health care really a luxury? Journal of Health Economics, 16(2), pp. 207-229.
Caporale, G.M. and Pittis, N. (2004) Estimator choice and Fisher’s paradox: A Monte Carlo study. Econometric Reviews, 23(1), pp. 25-52.
Clemente, J., Marcuello, C., Montanes, A. and Pueyo, F. (2004) On the international stability of health care expenditure functions: Are government and private function similar? Journal of Health Economics, 23(3), pp. 589-613.
Deaton, A. (1995) Growth and saving: What do we know, what do we need to know, and what might we learn? Mimeo, Princeton University
Devlin, N. and Hansen, P. (2001) Health care spending and economic output: Granger causality. Applied Economics Letters, 8(8), pp. 561-564.
Dolado, J.J. and Lütkepohl, H. (1996) Making Wald tests work for cointegrated VAR system. Econometric Review, 15(4), pp. 369-386.
Enders, W. (2004) Applied Econometric Time Series (2nd ed.). United States of America: John Wiley & Sons.
Engle, R.F. and Granger, C.W.J. (1987) Co-integration and error-correction: Representation, estimation and testing. Econometrica, 55(2), pp. 987-1008.
Freeman, D.G. (2003) Is health care a necessity or a luxury? Pooled estimates of income elasticity from US State-level data. Applied Economics, 35(5), pp. 495-502.
Gredtham, Ulf-G. and Lothgren, M. (2000) On stationarity and cointegration of international health expenditure and GDP. Journal of Health Economics, 19(4), pp. 461-475.
Gerdtham, Ulf-G., Søgaard, J., Andersson, F. and Jönsson, B. (1992) An econometric analysis of health care expenditure: A cross-section study of the OECD countries. Journal of Health Economics, 11(1), pp. 63-84.
Grossman, M. (1972) On the concept of health capital and the demand for health. Journal of Political Economy, 80(2), pp. 223-255.
Hatemi-J, A. and Shukur, G. (2002) Multivariate-based causality tests of twin deficits in the US. Journal of Applied Statistics, 29(6), pp. 817-824.
Hansen, P. and King, A. (1996) The determinants of health care expenditure: A cointegration approach. Journal of Health Economics, 15(1), pp. 127-137.
Lütkepohl, H. (1991) Introduction to multiple time series analysis. Springer-Verlag, Germany.
Masih, A.M.M. and Masih, R. (1998) Does money cause prices, or the other way around? Multi-country econometric evidence including error-correction modelling from South-east Asia. Journal of Economic Studies, 25(3), pp. 138-160.
Murray, C.J.L., Govindaraj, R. and Musgrove, P. (1994) National health expenditures: A global analysis. Bulletin of the World Health Organization, 72(4), pp. 623-637.
Mushkin, S.J. (1962) Health as an investment. Journal of Political Economy, 70(5), pp. 129-157.
Narayan, P.K. (2005) The saving and investment nexus for China: Evidence from cointegration tests. Applied Economics, 37(17), pp. 1979-1990.
Newhouse, J.P. (1977) Medical-care expenditure: A cross-national survey. Journal of Human Resources, 12(1), pp. 115-125.
Parkin, D., Mcquire, A. and Yule, B. (1987) Aggregate health care expenditures and national income: Is health a luxury good? Journal of Health Economics, 6(2), pp. 109-127.
Panopoulou, E. and Pittis, N. (2004) A comparison of autoregressive distributed lag and dynamic OLS cointegration estimators in the case of a serially correlated cointegration error. Econometrics Journal, 7(2), pp. 585-617.
Pesaran, M.H. and Shin, Y. (1999) An autoregressive distributed lag modelling approach to cointegration analysis. In Econometrics and Economic Theory in the 20th Century. The Ragnar Frisch Centennial Symposium, ed. Steinar Strom. Cambridge: Cambridge University Press.
Pesaran, M.H., Shin, Y. and Smith, R.J. (2001) Bounds testing approaches to the analysis of the level relationships. Journal of Applied Econometrics, 16(3), pp. 289-326.
Phillips, P.C.B. and Hansen, B. (1990) Statistical inference in Instrumental variables regression with I(1) processes. Review of Economic Studies, 57(1), pp. 99-125.
Rao, R.R., Jani, R. and Sanjivee, P. (2008) Health, quality of life and GDP: An ASEAN experience. Asian Social Science, 4(4), pp. 70-76.
Roberts, J. (1999) Sensitivity of elasticity estimates for OECD health care spending: Analysis of a dynamic heteroskedasticity data field. Health Economics, 8(5), pp. 459-472.
Samudram, M., Nair, M. and Vaithilingam, S. (2009) Keynes and Wagner on government expenditures and economic development: The case of a developing economy. Empirical Economics, 36(3), pp. 697-712.
Sen, A. (2005) Is health care a luxury? New evidence from OECD data. International Journal of Health Care Finance and Economics, 5(2), pp. 147-164.
Shukur, G. and Mantalos, P. (2000) A simple investigation of the Granger-causality test in integrated-cointegrated VAR systems. Journal of Applied Statistics, 27(8), pp. 1021-1031.
Stock, J.H. and Watson, M.W. (1993) A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica, 61(4), pp. 783-820.
Tang, C.F. (2008) Wagner law and Keynesian hypothesis: New evidence from recursive regression-based causality approaches. ICFAI Journal of Public Finance, 6(4), pp. 29-38.
Tang, C.F. (2009) An examination of the government spending and economic growth nexus for Malaysia using the leveraged bootstrap simulation approach. Global Economic Review, 38(2), pp. 215-227.
Wang, Z. and Rettenmaier, A.J. (2007) A note on cointegration of health expenditures and income. Health Economics, 16(6), pp. 559-578.