SpringerLink
Log in

Do political factors influence public health expenditures? Evidence pre- and post-great recession

  • Original Paper
  • Published:
The European Journal of Health Economics Aims and scope Submit manuscript

Abstract

This paper analyses whether government ideology and other political- and electoral-related factors influence country-level public healthcare expenditures, focussing on the impact of the Great Recession on that relationship. We test this hypothesis for the OECD countries in 1970–2016. Our results reveal the presence of a partisan effect, left-wing governments being more likely to raise public expenditures in the health sector. We also find that coalitions increase these expenditures, whilst minority governments and those with a high presence in the lower house decrease them. Meanwhile, the opportunistic behaviour of incumbents related to the timing of elections is not supported by our results. The percentage of public expenditures over total health expenditures is also examined, obtaining similar results regarding the partisan effect. However, the onset of the Great Recession has altered these relationships, neutralizing the impact of political factors.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price includes VAT (Germany)

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Source: OECD health database

Fig. 2

Source: OECD health database

Fig. 3

Source: OECD health database

Similar content being viewed by others

Notes

  1. See Martin et al. [55] for a review of the determinants in the OECD countries. See Gbesemete and Gerdtham [32], Ghobarah et al. [36] and Ke et al. [54] for analogous analyses in develo** countries.

  2. Hansen and King [37] argue that some of these studies suffer from misspecification, hypothesis later rejected by McCoskey and Selden [57].

  3. Latvia joined the OECD in 2016, the last year of our sample, and Lithuania and Colombia were invited to join the OECD in 2018, out of our temporary sample, which is why these three countries are not considered in the analysis.

  4. Parkin et al. [64] recommend the use of PPP, arguing the importance of both prices and quantities in the relationship between GDP and PHCE. Recent papers, such as Herwartz and Theilen [40], also use monetary data in PPP.

  5. The U.S. is a paradigmatic case since both public and private HCE per capita are very high, but their efficiency is low, as shown in Joumard et al. [52]. Nevertheless, the analysis of efficiency is beyond the scope of this paper.

  6. Parties are classified as right-wing, centre, or left-wing according to their economic ideology.

  7. During the period 2003–2013, Turkey was ruled by a single party classified as other ideologies, so we consider these observations as missing values.

  8. Further discussion about other methodological issues is found in Okunade et al. [61].

  9. We apply the Im-Pesaran-Shin [43] test to the political series that are not affected by cross-sectional dependence (elections and years in office), as well as to the series with less evidence of cross-sectional dependence (ideology index and force government). Results strongly reject the null hypothesis of the presence of a unit root.

  10. Since we introduce time fixed effects in the empirical model, we have to exclude one of the temporal effect variables to avoid collinearity problems.

  11. See Baskaran [12] for a discussion about the “common pool problem”, strongly linked to the veto player theory.

  12. See Dreher et al. [28] and Meinhard and Potrafke [56] for an extensive debate.

  13. We want to note that Models 3D and 4C include the same set of variables.

  14. According to Joumard et al. [52]. We select the countries with a score of decentralisation higher than 3, though results do not change if this threshold changes.

References

  1. Aidt, T.S., Veiga, F.J., Veiga, L.G.: Election results and opportunistic policies: a new test of the rational political business cycle model. Public Choice 148, 21–44 (2011)

    Article  Google Scholar 

  2. Alesina, A., Roubini, N.: Political cycles in OECD economies. Rev. Econ. Stud. 59, 663–688 (1992)

    Article  Google Scholar 

  3. Alesina, A., Roubini, N., Cohen, G.D.: Political cycles and the macroeconomy. MIT Press, Cambridge (1997)

    Book  Google Scholar 

  4. Allan, J.P., Scruggs, L.: Political partisanship and welfare state reform in advanced industrial societies. Am. J. Polit. Sci. 48, 496–512 (2004)

    Article  Google Scholar 

  5. Amable, B., Gatti, D., Schumacher, J.: Welfare-state retrenchment: the partisan effect revisited. Oxf. Rev. Econ. Policy 22, 426–444 (2006)

    Article  Google Scholar 

  6. An, Y., Zhao, K., Zhou, R.: Health spending and public pension: evidence from panel data. Appl. Econ. 48, 987–1004 (2016)

    Article  Google Scholar 

  7. Bai, J., Carrion-i-Silvestre, J.L.: Structural changes, common stochastic trends, and unit roots in panel data. Rev. Econ. Stud. 76, 471–501 (2009)

    Article  Google Scholar 

  8. Bai, J., Perron, P.: Estimating and testing linear models with multiple structural changes. Econometrica 66, 47–78 (1998)

    Article  Google Scholar 

  9. Ball, L.M.: (2014). Long-Term Damage from the Great Recession in OECD Countries. National Bureau of Economic Research (No. w20185)

  10. Baltagi, B.H.: Econometric Analysis of Panel Data. Wiley (2008)

  11. Baltagi, B.H., Moscone, F.: Health care expenditure and income in the OECD reconsidered: evidence from panel data. Econ. Model. 27, 804–811 (2010)

    Article  Google Scholar 

  12. Baskaran, T.: Coalition governments, cabinet size, and the common pool problem: evidence from the German states. Eur. J. Polit. Econ. 32, 356–376 (2013)

    Article  Google Scholar 

  13. Beck, T., Clarke, G., Groff, A., Keefer, P., Walsh, P.: New tools in comparative political economy: the database of political institutions. World Bank Econ. Rev. 15, 165–176 (2001)

    Article  Google Scholar 

  14. Beland, L.P., Oloomi, S.: Party affiliation and public spending: evidence from US governors. Econ. Inq. 55, 982–995 (2017)

    Article  Google Scholar 

  15. Bell, D.N., Blanchflower, D.G.: Young people and the Great Recession. Oxf. Rev. Econ. Policy 27, 241–267 (2011)

    Article  Google Scholar 

  16. Blomqvist, ÅG., Carter, R.A.L.: Is health care really a luxury? J. Health Econ. 16, 207–229 (1997)

    Article  CAS  PubMed  Google Scholar 

  17. Braendle, T., Colombier, C.: What drives public health care expenditure growth? Evidence from Swiss cantons, 1970–2012. Health Policy 120, 1051–1060 (2016)

    Article  PubMed  Google Scholar 

  18. Breyer, F., Zweifel, P., Kifmann, M.: Health Economics, 2nd edn. Springer, Berlin/Heidelberg (2009)

    Google Scholar 

  19. Carrion-i-Silvestre, J.L.: Health care expenditure and GDP: are they broken stationary? J. Health Econo. 24, 839–854 (2005)

    Article  Google Scholar 

  20. Clemente, J., Marcuello, C., Montañés, A., Pueyo, F.: On the international stability of health care expenditure functions: are government and private functions similar? J. Health Econ. 23, 589–613 (2004)

    Article  PubMed  Google Scholar 

  21. Clemente, J., Marcuello, C., Montañés, A.: Pharmaceutical expenditure, total health-care expenditure and GDP. Health Econ. 17, 1187–1206 (2008)

    Article  PubMed  Google Scholar 

  22. Costa-Font, J., Pons-Novell, J.: Public health expenditure and spatial interactions in a decentralized national health system. Health Econ. 16, 291–306 (2007)

    Article  PubMed  Google Scholar 

  23. Costa-Font, J., Moscone, F.: The impact of decentralization and inter-territorial interactions on Spanish health expenditure. In: Spatial Econometrics, pp.167–184. Physica, Heidelberg (2009)

    Chapter  Google Scholar 

  24. Crivelli, L., Filippini, M., Mosca, I.: Federalism and regional health care expenditures: an empirical analysis for the Swiss cantons. Health Econ. 15, 535–541 (2006)

    Article  PubMed  Google Scholar 

  25. Cusack, T.R.: Partisan politics and public finance: Changes in public spending in the industrialized democracies, 1955–1989. Public Choice 91, 375–395 (1997)

    Article  Google Scholar 

  26. De la Maisonneuve, C., Moreno-Serra, R., Murtin, F., Martins, O.J.: The drivers of public health spending: Integrating policies and institutions. OECD Economics Department Working Papers, 1283 (2016)

  27. Dreher, A.: Does globalization affect growth? Evidence from a new index of globalization. Appl. Econ. 38, 1091–1110 (2006)

    Article  Google Scholar 

  28. Dreher, A., Sturm, J.E., Ursprung, H.W.: The impact of globalization on the composition of government expenditures: Evidence from panel data. Public Choice 134, 263–292 (2008)

    Article  Google Scholar 

  29. Driscoll, J.C., Kraay, A.C.: Consistent covariance matrix estimation with spatially dependent panel data. Rev. Econ. Stat. 80, 549–560 (1998)

    Article  Google Scholar 

  30. Freeman, D.G.: Is health care a necessity or a luxury? Pooled estimates of income elasticity from US state-level data. Appl. Econ. 35, 495–502 (2003)

    Article  Google Scholar 

  31. Friedrich, R.J.: Indefense of multiplicative terms in multiple regression equations. Am. J. Polit. Sci. 26, 797–833 (1982)

    Article  Google Scholar 

  32. Gbesemete, K.P., Gerdtham, U.G.: Determinants of health care expenditure in Africa: a cross-sectional study. World Dev. 20, 303–308 (1992)

    Article  Google Scholar 

  33. Gerdtham, U.G., Jonssön, B.: Price and quantity in international comparisons of health care expenditure. Appl. Econ. 23, 1519–1528 (1991)

    Article  Google Scholar 

  34. Gerdtham, U.G., Jonssön, B.: Conversion factor instability in international comparisons of health care expenditure. J. Health Econ. 10, 227–234 (1991)

    Article  CAS  PubMed  Google Scholar 

  35. Gerdtham, U.G., Löthgren, M.: New panel results on cointegration of international health expenditure and GDP. Appl. Econ. 34, 1679–1686 (2002)

    Article  Google Scholar 

  36. Ghobarah, H.A., Huth, P., Russett, B.: Comparative public health: the political economy of human misery and well-being. Int. Stud. Quart. 48, 73–94 (2004)

    Article  Google Scholar 

  37. Hansen, P., King, A.: The determinants of health care expenditure: a cointegration approach. J. Health Econ. 15, 127–137 (1996)

    Article  CAS  PubMed  Google Scholar 

  38. Hartwig, J.: What drives health care expenditure? Baumol’s model of ‘unbalanced growth’ revisited. J. Health Econ. 27, 603–623 (2008)

    Article  PubMed  Google Scholar 

  39. Herwartz, H., Theilen, B.: The determinants of health care expenditure: testing pooling restrictions in small samples. Health Econ. 12, 113–124 (2003)

    Article  PubMed  Google Scholar 

  40. Herwartz, H., Theilen, B.: Health care and ideology: a reconsideration of political determinants of public healthcare funding in the OECD. Health Econ. 23, 225–240 (2014)

    Article  PubMed  Google Scholar 

  41. Hitiris, T.: Health care expenditure and integration in the countries of the European Union. Appl. Econ. 29, 1–6 (1997)

    Article  Google Scholar 

  42. Hitiris, T., Posnett, J.: The determinants and effects of health expenditure in developed countries. J. Health Econ. 11, 173–181 (1992)

    Article  CAS  PubMed  Google Scholar 

  43. Im, K.S., Pesaran, M.H., Shin, Y.: Testing for unit roots in heterogeneous panels. J. Econ. 115, 53–74 (2003)

    Article  Google Scholar 

  44. Imbeau, L.M., Pétry, F., Lamari, M.: Left-right party ideology and government policies: a meta-analysis. Eur. J. Polit. Res. 40, 1–29 (2001)

    Google Scholar 

  45. Immergut, E.M.: Health Politics-Interests and Institutions in Western Europe. Cambridge University Press, Cambridge (1992)

    Google Scholar 

  46. Jensen, C.: Determinants of welfare service provision after the Golden Age. Int. J. Soc. Welf. 20, 125–134 (2011)

    Article  Google Scholar 

  47. Jensen, C.: Marketization via compensation: health care and the politics of the right in advanced industrialized nations. Br. J. Polit. Sci. 41, 907–926 (2011)

    Article  Google Scholar 

  48. Jensen, C.: Two sides of the same coin? Left-wing governments and labour unions as determinants of public spending. Socio-Econ. Rev. 10, 217–240 (2012)

    Article  Google Scholar 

  49. Jensen, C.: Labour market- versus life course-related social policies: understanding cross-programme differences. J. Eur. Public Policy 19, 275–291 (2012)

    Article  Google Scholar 

  50. Jewell, T., Lee, J., Tieslau, M., Strazicich, M.C.: Stationarity of health expenditures and GDP: evidence from panel unit root tests with heterogeneous structural breaks. J. Health Econ. 22, 313–323 (2003)

    Article  PubMed  Google Scholar 

  51. Joshi, N.K.: Party politics, governors, and healthcare expenditures. Econ. Politics 27, 53–77 (2015)

    Article  Google Scholar 

  52. Joumard, I., Andre, C., Nicq, C.: Health Care Systems: Efficiency and Institutions. OECD Economics Department Working Paper No. 769 (2010)

  53. Karanikolos, M., Mladovsky, P., Cylus, J., Thomson, S., Basu, S., Stuckler, D., McKee, M.: Financial crisis, austerity, and health in Europe. Lancet 381, 1323–1331 (2013)

    Article  PubMed  Google Scholar 

  54. Ke, X., Saksena, P., Holly, A.: The Determinants of Health Expenditure: a Country-Level Panel Data Analysis. World Health Organization, Geneva (2011)

    Google Scholar 

  55. Martin, J.J.M., Puerto López del Amo González, M., Dolores Cano García, M.: Review of the literature on the determinants of healthcare expenditure. Appl. Econ. 43, 19–46 (2011)

    Article  Google Scholar 

  56. Meinhard, S., Potrafke, N.: The globalization–welfare state nexus reconsidered. Rev. Int. Econ. 20, 271–287 (2012)

    Article  Google Scholar 

  57. McCoskey, S.K., Selden, T.M.: Health care expenditures and GDP: panel data unit root test results. J. Health Econ. 17, 369–376 (1998)

    Article  CAS  PubMed  Google Scholar 

  58. Narayan, P.K.: Examining structural breaks and growth rates in international health expenditures. J. Health Econ. 25, 877–890 (2006)

    Article  PubMed  Google Scholar 

  59. Newhouse, J.P.: Medical-care expenditure: a cross-national survey. J. Hum. Resour. 12, 115–125 (1977)

    Article  CAS  PubMed  Google Scholar 

  60. Newhouse, J.P.: Cross-national differences in health spending: what do they mean? J. Health Econ. 6, 159–162 (1987)

    Article  CAS  PubMed  Google Scholar 

  61. Okunade, A.A., Karakus, M.C., Okeke, C.: Determinants of health expenditure growth of the OECD countries: jackknife resampling plan estimates. Health Care Manag. Sci. 7, 173–183 (2004)

    Article  PubMed  Google Scholar 

  62. Okunade, A.A., Murthy, V.N.: Technology as a ‘major driver’ of health care costs: a cointegration analysis of the newhouse conjecture. J. Health Econ. 21, 147–159 (2002)

    Article  Google Scholar 

  63. Pammolli, F., Riccaboni, M., Magazzini, L.: The sustainability of European health care systems: beyond income and aging. Eur. J. Health Econ. 13, 623–634 (2012)

    Article  PubMed  Google Scholar 

  64. Parkin, D., McGuire, A., Yule, B.: Aggregate health care expenditures and national income: is health care a luxury good? J. Health Econ. 6, 109–127 (1987)

    Article  CAS  PubMed  Google Scholar 

  65. Persson, T., Tabellini, G.: Political economics and public finance. Handb. Public Econ. 3, 1549–1659 (2002)

    Article  Google Scholar 

  66. Pesaran, M.H.: General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics 0435 (2004)

  67. Pesaran, M.H.: A simple panel unit root test in the presence of cross-section dependence. J. Appl. Econom 22, 265–312 (2007)

    Article  Google Scholar 

  68. Pettersson-Lidbom, P.: Do parties matter for economic outcomes? A regression-discontinuity approach. J. European Econ. Assoc. 6, 1037–1056 (2008)

    Article  Google Scholar 

  69. Potrafke, N.: Did globalization restrict partisan politics? An empirical evaluation of social expenditures in a panel of OECD countries. Public Choice 140, 105–124 (2009)

    Article  Google Scholar 

  70. Potrafke, N.: The growth of public health expenditures in OECD countries: do government ideology and electoral motives matter? J. Health Econ. 29, 797–810 (2010)

    Article  PubMed  Google Scholar 

  71. Potrafke, N.: Political cycles and economic performance in OECD countries: empirical evidence from 1951 to 2006. Public Choice 150, 155–179 (2012)

    Article  Google Scholar 

  72. Reeves, A., McKee, M., Basu, S., Stuckler, D.: The political economy of austerity and healthcare: cross-national analysis of expenditure changes in 27 European nations 1995–2011. Health Policy 115: 1–8 (2014)

    Article  PubMed  Google Scholar 

  73. Reich, O., Weins, C., Schusterschitz, C., Thöni, M.: Exploring the disparities of regional health care expenditures in Switzerland: some empirical evidence. Eur. J. Health Econ. 13, 193–202 (2012)

    Article  PubMed  Google Scholar 

  74. Roberts, J.: Sensitivity of elasticity estimates for OECD health care spending: analysis of a dynamic heterogeneous data field. Health Econ. 8, 459–472 (1999)

    Article  CAS  PubMed  Google Scholar 

  75. Rogoff, K., Sibert, A.: Elections and macroeconomic policy cycles. Rev. Econ. Stud. 55, 1–16 (1988)

    Article  Google Scholar 

  76. Rose, A.K., Spiegel, M.M.: Cross-country causes and consequences of the crisis: an update. Eur. Econ. Rev. 55, 309–324 (2011)

    Article  Google Scholar 

  77. Schmidt, M.G.: When parties matter: a review of the possibilities and limits of partisan influence on public policy. Eur. J. Polit. Res. 30, 155–183 (1996)

    Article  Google Scholar 

  78. Tavares, J.: Does the right or left matter? Cabinets, credibility and adjustments. J. Public Econ. 88, 2447–2468 (2004)

    Article  Google Scholar 

  79. Tavits, M., Letki, N.: When left is right: party ideology and policy in post-communist Europe. Am. Polit. Sci. Rev. 103, 555–569 (2009)

    Article  Google Scholar 

  80. Van Elk, R., Mot, E., Franses, P.H.: Modelling Health Care Expenditures. CPB Netherlands Bureau for Economic Policy Analysis Discussion Paper, 121 (2009)

  81. Vatter, A., Rüefli, C.: Do political factors matter for health care expenditure? A comparative study of Swiss cantons. J. Public Policy 23, 301–323 (2003)

    Article  Google Scholar 

  82. Wagstaff, A.: Social Health Insurance Vs. Tax-financed Health Systems: Evidence from the OECD. World Bank, Washington D.C. (2009)

    Book  Google Scholar 

  83. Werblow, A., Felder, S., Zweifel, P.: Population ageing and health care expenditure: a school of ‘red herrings’? Health Econ. 16, 1109–1126 (2007)

    Article  PubMed  Google Scholar 

  84. Wilson, S.H., Walker, G.M.: Unemployment and health: a review. Public Health 107, 153–162 (1993)

    Article  CAS  PubMed  Google Scholar 

Download references

Acknowledgements

The authors acknowledge the financial support of the Regional Government of Aragon and the European Fund of Regional Development (CASSETEM research group, project S-124; Population Economy, Job Market and Industrial Economy research group, Grant S32_17R), and Universidad San Jorge.

Author information

Authors and Affiliations

  1. Department of Economic Analysis, University of Zaragoza, Gran Vía 2, 50005, Zaragoza, Spain

    Héctor Bellido & Lorena Olmos

  2. San Jorge University, Autovía A-23 Zaragoza-Huesca Km. 299, Villanueva de Gállego, 50830, Zaragoza, Spain

    Juan Antonio Román-Aso

Authors
  1. Héctor Bellido
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Lorena Olmos
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Juan Antonio Román-Aso
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Lorena Olmos.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Bellido, H., Olmos, L. & Román-Aso, J.A. Do political factors influence public health expenditures? Evidence pre- and post-great recession. Eur J Health Econ 20, 455–474 (2019). https://doi.org/10.1007/s10198-018-1010-2

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10198-018-1010-2

Keywords

JEL Classification

Search

Navigation