Income and total expenditure on health in OECD countries: Evidence from panel data and Hsiao's version of Granger non-causality tests

Abstract

Hsiao's version of Granger causality is used to revisit the causal relationship between GDP and aggregate health care spending, which it assumed to be in either or both directions theoretically. For the sample of 22 OECD countries tested over the period 1970-2012 it appears bilateral relationship is widely predominant in vast majority of OECD countries. Interestingly, our results furnish impressive evidence that the optimum lag length of relationship between health care expenditure and GDP is dramatically higher than we have estimated in previous empirical studies and it is around 10.