On Health Expenditure and Income Inequality

Abstract

This study investigates the relationship between health care expenditure and income inequality empirically. Using data from a large panel of countries covering a sizeable period of time, how level and composition of health care expenditures correlate with income inequality is studied via the panel data fixed effects estimation methodology. These estimations yield several robust findings. First, there is a significant positive correlation between income inequality and reliance on private resources for health care financing. Second, there exists a significant negative correlation between health care expenditure per capita and income inequality. Third, there is a significant negative correlation between income inequality and health care expenditure as a share of GDP. Next, this study analyzes a select group of well-established democracies with developed economies to detect if health expenditure and income inequality variables correlate with public beliefs and preferences. Empirical analyses reveal that indeed belief and preferences accord well with policy choices.