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Testing the Grossman model of medical spending determinants with macroeconomic panel data

Author

Listed:
  • Jochen Hartwig

    (Professur für Wirtschaftspolitik, Faculty of Economics and Business Administration, Chemnitz University of Technology, CESifo Munich, Germany)

  • Jan-Egbert Sturm

    (KOF Swiss Economic Institute, ETH Zurich, Switzerland, CESifo Munich, Germany)

Abstract
Michael Grossman’s human capital model of the demand for health has been argued to be one of the major achievements in theoretical health economics. Attempts to test this model empirically have been sparse, however, and with mixed results. These attempts so far relied on using – mostly cross-sectional – micro data from household surveys. For the first time in the literature we bring in macroeconomic panel data for 29 OECD countries over the period 1970-2010 to test the model. In order to check the robustness of the results for the determinants of medical spending identified by the model, we include additional covariates that have been suggested as determinants for medical spending in an Extreme Bounds Analysis (EBA) framework. The preferred model specifications (including the robust covariates) lend some support to the empirical relevance of the determinants of medical spending identified by the Grossman model, except for the relative medical price.

Suggested Citation

  • Jochen Hartwig & Jan-Egbert Sturm, 2017. "Testing the Grossman model of medical spending determinants with macroeconomic panel data," Chemnitz Economic Papers 001, Department of Economics, Chemnitz University of Technology, revised Feb 2017.
    • Handle: RePEc:tch:wpaper:cep001
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    File URL: https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/download/tch/wpaper/CEP001_Hartwig_Sturm.pdf
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    References listed on IDEAS

    as
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    2. Rahman, Mohammad Mafizur & Alam, Khosrul, 2022. "Life expectancy in the ANZUS-BENELUX countries: The role of renewable energy, environmental pollution, economic growth and good governance," Renewable Energy, Elsevier, vol. 190(C), pages 251-260.
    3. Besuthu Hlafa & Kin Sibanda & Dumisani MacDonald Hompashe, 2019. "The Impact of Public Health Expenditure on Health Outcomes in South Africa," IJERPH, MDPI, vol. 16(16), pages 1-13, August.
    4. Akinola Gbenga Wilfred & Abieyuwa Ohonba, 2024. "The Effects of Fossil Fuel Consumption-Related CO 2 on Health Outcomes in South Africa," Sustainability, MDPI, vol. 16(11), pages 1-22, June.
    5. Anne Mason & Idaira Rodriguez Santana & María José Aragón & Nigel Rice & Martin Chalkley & Raphael Wittenberg & Jose-Luis Fernandez, 2019. "Drivers of health care expenditure: Final report," Working Papers 169cherp, Centre for Health Economics, University of York.
    6. David Mhlanga & Rufaro Garidzirai, 2020. "The Influence of Racial Differences in the Demand for Healthcare in South Africa: A Case of Public Healthcare," IJERPH, MDPI, vol. 17(14), pages 1-10, July.

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    More about this item

    Keywords

    Medical spending; Grossman model; Extreme Bounds Analysis; OECD panel;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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