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Econometric analyses of national health expenditures: Can positive economics help to answer normative questions?
Author(s) -
McGuire Alistair,
Parkin David,
Hughes David,
Gerard Karen
Publication year - 1993
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.4730020205
Subject(s) - normative , economics , health care , cointegration , public economics , empirical research , excuse , health economics , actuarial science , econometrics , economic growth , political science , statistics , mathematics , law
The size of national health care expenditure is an important research and policy issue. This paper reviews theoretical and empirical analyses of an implied optimal size for a health sector. Various economic theories are explicitly or implicitly invoked, but none is fully satisfactory. Theory provides, at best, a loose justification for empirical specifications of health sector behaviour. Nevertheless, this has a large and growing empirical research industry. The complexity of the issues provides an excuse for reliance on empirical analyses using ad hoc models. The paper analyses aggregate time‐series data, using the cointegration approach, on health, health care expenditures and national income. Only one national model met both statistical criteria and showed a significant relationship: between potential life years lost and health care expenditure in the UK. The case for any general relationships remains unproven. There is no objective scientific method to determine optimal health expenditure, nor should we expect one. However, positive analyses can help with normative questions. A better understanding of health expenditure determination would arise from better specification of the relationships, perhaps by analysis at a lower level of aggregation.