Determinants of Thailand household healthcare expenditure: the relevance of permanent resources and other correlates

Several papers in the leading health economics journals modeled the determinants of healthcare expenditure using household survey or family budgets data of developed countries. Past work largely used self‐reported current income as the core determinant, whereas the theoretically correct concept of household resource constraint is permanent or long‐run income ( á lá Milton Friedman). This paper strives to rectify the theoretical oversight of using current income by augmenting the model with household asset. Using longitudinal data, we constructed ‘wealth index’ as a distinct covariate to capture the households' tendency to liquidate assets when defraying necessary healthcare liabilities after exhausting cash incomes. (Current income and assets together capture the household expanded resource base). Using 98 632 household observations from Thailand Socio‐Economic Surveys (1994–2000 biennial data cycles) we found, using a double‐hurdle model with dependent errors, that out‐of‐pocket healthcare spending behaves as a technical necessity across income quintiles and household sizes. Pre‐1997 economic shock income elasticities are smaller than the post‐shock estimates across income quintiles for large and small households. Proximity to death, median age, and assets are also among other significant determinants. Our novel findings extend the theoretical consistency of a multi‐level decision model in household healthcare expenditure in the developing Asian country context. Copyright © 2009 John Wiley & Sons, Ltd.