Determinants of Health Expenditures: Stylized Facts and a New Signal


This article further investigates the determinants of health expenditures by using aggregate data. Specifically, a panel data analysis of 25 OECD countries reveals that under several model specifications, the proxy for population ageing has no effect on health costs in accordance with recent findings. In contrast to this well-known result, an additional estimation conducted to check robustness revealed that the ageing variable becomes positive and significant. The significant effect may provide a new signal for a determinant of health expenditures. This result suggests that ageing is an important factor that cannot be ignored when considering variations in health expenditures.

Share and Cite:

Hosoya, K. (2014) Determinants of Health Expenditures: Stylized Facts and a New Signal. Modern Economy, 5, 1171-1180. doi: 10.4236/me.2014.513109.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Getzen, T.E. (1992) Population Aging and the Growth of Health Expenditure. Journal of Gerontology, 47, S98-S104.
[2] Norton, E.C. (2000) Long-Term Care. In: Culyer, A.J. and Newhouse, J.P., Eds., Handbook of Health Economics, Vol. 1B, Elsevier, Amsterdam, 956-994.
[3] OECD (1996) Health Care Reform: The Will to Change. OECD, Paris.
[4] Hitiris, T. and Posnett, J. (1992) The Determinants and Effects of Health Expenditure in Developed Countries. Journal of Health Economics, 11, 173-181.
[5] Barros, P.P. (1998) The Black-Box of Health Care Expenditure Growth Determinants. Health Economics, 7, 533-544.<533::AID-HEC374>3.0.CO;2-B
[6] Gerdtham, U.-G., Jönsson, B., MacFarlan, M. and Oxley, H. (1998) The Determinants of Health Expenditure in the OECD Countries: A Pooled Data Analysis. In: Zweifel, P., Ed., Health, the Medical Profession, and Regulation, Kluwer, Academic Publishers, Dordrecht, 287-310.
[7] Herwartz, H. and Theilen, B. (2003) The Determinants of Health Care Expenditure: Testing Pooling Restrictions in Small Samples. Health Economics, 12, 113-124.
[8] Gerdtham, U.-G. and Jönsson, B. (2000) International Comparisons of Health Expenditure: Theory, Data and Econometric Analysis. In: Culyer, A.J. and Newhouse, J.P., Eds., Handbook of Health Economics, Vol. 1A, Elsevier, Amsterdam, 11-53.
[9] Di Matteo, L. and Di Matteo, R. (1998) Evidence on the Determinants of Canadian Provincial Government Health Expenditures: 1965-1991. Journal of Health Economics, 17, 211-228.
[10] Wang, Z. (2009) The Determinants of Health Expenditures: Evidence from US State-Level Data. Applied Economics, 41, 429-435.
[11] Felder, S., Werblow, A. and Zweifel, P. (2010) Do Red Herrings Swim in Circles? Controlling for the Endogeneity of Time to Death. Journal of Health Economics, 29, 205-212.
[12] Werblow, A., Felder, S. and Zweifel, P. (2007) Population Ageing and Health Care Expenditure: A School of “Red Herrings”? Health Economics, 16, 1109-1126.
[13] Zweifel, P., Felder, S. and Meier, M. (1999) Ageing of Population and Health Care Expenditure: A Red Herring? Health Economics, 8, 485-496.<485::AID-HEC461>3.0.CO;2-4
[14] Dow, W.H. and Norton, E.C. (2002) The Red Herring That Eats Cake: Heckit versus Two-Part Model Redux. Triangle Health Economics Working Paper No. 1, University of North Carolina at Chapel Hill, Chapel Hill.
[15] Getzen, T.E. (2001) Aging and Health Care Expenditures: A Comment on Zweifel, Felder and Meiers. Health Economics, 10, 175-177.
[16] Salas, C. and Raftery, J.P. (2001) Econometric Issues in Testing the Age Neutrality of Health Care Expenditure. Health Economics, 10, 669-671.
[17] Seshamani, M. and Gray, A. (2004) Ageing and Health-Care Expenditure: The Red Herring Argument Revisited. Health Economics, 13, 303-314.
[18] Cutler, D.M. (2003) Disability and the Future of Medicare. New England Journal of Medicine, 349, 1084-1085.
[19] Dormont, B., Martins, J.O., Pelgrin, F. and Suhrcke, M. (2010) The Growth of Health Expenditures: Ageing vs. Technological Progress. In: Garibaldi, P., Martins, J.O. and van Ours, J., Eds., Ageing, Health, and Productivity, Oxford University Press, Oxford, 16-38.
[20] Yang, Z., Norton, E.C. and Stearns, S.C. (2003) Longevity and Health Care Expenditures: The Real Reasons Older People Spend More. Journal of Gerontology B: Social Sciences, 58, S2-S10.
[21] Baltagi, B.H. and Moscone, F. (2010) Health Care Expenditure and Income in the OECD Reconsidered: Evidence from Panel Data. Economic Modelling, 27, 804-811.
[22] Mosca, I. (2007) Decentralization as a Determinant of Health Care Expenditure: Empirical Analysis for OECD Countries. Applied Economics Letters, 14, 511-515.
[23] Crivelli, L., Filippini, M. and Mosca, I. (2006) Federalism and Regional Health Care Expenditures: An Empirical Analysis for the Swiss Cantons. Health Economics, 15, 535-541.
[24] Newhouse, J.P. (1992) Medical Care Costs: How Much Welfare Loss? Journal of Economic Perspectives, 6, 3-21.
[25] Wooldridge, J.M. (2002) Econometric Analysis of Cross Section and Panel Data. The MIT Press, Cambridge.

Copyright © 2021 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.