1. Francia L., Gitto L., Mennini F.S., Polistena B (*). HEALTH EXPENDITURE IN OECD COUNTRIES: AN ECONOMETRIC ANALYSIS Francia L., Gitto L., Mennini F.S., Polistena B (*) Health care expenditure has constituted the main topic of many analysis, starting from the pioneering work by Newhouse (1977). In all analysis it has been given attention especially to the positive relationship between per capita GDP and health expenditure. However, as far as we know, a more comprehensive econometric analysis, aimed at observing determinants and results achieved by OECD countries with regard to health spending over a longer time span has not been performed yet. Hence, the present work is aimed at filling this gap, analysing health expenditure in OECD countries in the period 1991-2004. (*) CEIS Sanità (CHEM), Faculty of Economics, University of Rome“Tor Vergata”, Italy Table 1 – Descriptive statistics Introduction Results Main references Methods Corresponding author: Lara Gitto, CEIS Sanità – Facoltà di Economia, Università di Roma “Tor Vergata”, Via Columbia 2, 00133 Rome (Italy) - E-mail:Gitto@CEIS.uniroma2.it, Phone: +39 06 72595643 Fax: +39 06 233245536Gitto@CEIS.uniroma2.it In 2004, health expenditure in OECD countries has constituted, on average, the 9.5% of the GDP. Although resources for health have been increasing for the most of the countries, some of them still do not include health among their priorities: for example, Korea spends on health only the 5.6% of GDP, while this proportion reaches the 15.3% in the United States. Per capita health expenditure shows a various pattern going from 182 $ in Turkey (and very low values for Mexico, Poland and Korea) to more than 6,000 $ per year in the United States. Number of physicians and beds for acute may represent indicators of supply: the first goes from 0.9 physician/1000 inhabitants in Korea to 4.88 in Greece. As concerning the aspect of demand for health care, occupation of beds for acute/1000 has been considered: Turkey and Mexico are at the bottom, whereas in Canada 91/1000 beds are occupied for acute. Overall, it seems that people living in Western European countries as well as United States and Canada live longer and spend more for health, whereas health is not a priority in countries such as Turkey or Mexico, that are characterized by a low per capita GDP. It has been demonstrated that there is a positive relationship – and a positive elasticity as well - between health expenditure and per capita GDP in OECD countries; The aging population is likely to determine an increase in levels of health expenditure; Demand for health, as well as institutional framework should be better defined, for further developings of the analysis. Conclusions 1) Gerdtham U., Søgaard J., Andersson F. and Jönsson B. (1991b), “An econometric analysis of health care expenditure: A cross-section study of the OECD countries”, Journal of Health Economics, 11: 63-84. 2) Giannoni M., Hitiris T. (1999), The Regional Impact of Health Care Expenditure: The Case of Italy, Discussion Papers in Economics no. 1999/20, University of York. 3) Hitiris T. and Posnett J. (1992), “The determinants and effects of health expenditure in developed countries”, Journal of Health Economics, 11: 173-181. 4) Mennini F.S. and Francia L. (2006), The evolution of health expenditure in Italy and in OECD countries, in Atella V., Donia Sofio A., Meneguzzo M., Mennini F.S. and Spandonaro F. (eds.), Rapporto CEIS Sanità 2006, Italpromo Esis Publishing Roma. 5) Newhouse J.P. (1977), “Medical care expenditure: A cross national survey”, Journal of Human Resources, 12: 115-125. 6) Newhouse J.P. (1987), “Cross National Differences in Health Spending. What Do They Mean?”, Journal of Health Economics, 6: 159-162. 7) Parkin D., McGuire A. and Yule B. (1987), “Aggregate health care expenditures and national income. Is health care a luxury good?”, Journal of Health Economics, 6: 109-127. Data sources OECD Health Data 2006 (last updating June 2006). Analysis A sample of 30 OECD countries has been observed from 1991 to 2004. Countries considered are (in alphabetical order): Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States. It has been employed a fixed effects model in order to take into account the heterogeneity among observed countries. The dependent variable is per capita health expenditure. Other variables employed are: - Per capita GDP; - % of population older than 80 years old; - occupation of beds in hospitals for acutes/1000; - number of physicians/1000; - % of public financing on total health expenditure. Estimations have been carried out for all countries in the panel as well as after having excluded outliers (US and Luxembourg, that show high levels of health expenditure comparing to per capita GDP. The positive relationship between health expenditure and GDP is confirmed. The variable number of physicians/1000 is positively correlated with health expenditure, as expected, and has the higher impact on determining the level of health expenditure. The positive coefficient associated to occupation of beds/1000 might be interpreted in the sense that there is a positive response from the government to the demand for health care. An augmented demand implies the need to provide more and better health assistance, especially for hospital care. However, this variable is not significant in all the estimations: hence, demand for health care should be better defined. The variable related to population over 80, that represent an indicator of demographic structure, shows a positive correlation with health spending. Elasticity of health expenditure GDP is positive; when log functional form is considered, all estimated coefficients are still significant but demand. R 2 value improves comparing to the previous estimation. When outliers (US and Luxembourg) are excluded, elasticity of health expenditure decreases. Table 2 – Estimation results Dependent variable: per capita health expenditure (log of per capita health expenditure)