Determinants of Healthcare Expenditure in Economic Cooperation Organization (ECO) Countries: Evidence from Panel Cointegration Tests

Over the last decade there has been an increase in healthcare expenditures while at the same time the inequity in distribution of resources has grown. These two issues have urged the researchers to review the determinants of healthcare expenditures. In this study, we surveyed the determinants of health expenditures in Economic Cooperation Organization (ECO) countries. We used Panel data econometrics methods for the purpose of this research. For long term analysis, we used Pesaran cross sectional dependency test followed by panel unit root tests to show first whether the variables were stationary or not. Upon confirmation of no stationary variables, we used Westerlund panel cointegration test in order to show whether long term relationships exist between the variables. At the end, we estimated the model with Continuous-Updated Fully Modified (CUP-FM) estimator. For short term analysis also, we used Fixed Effects (FE) estimator to estimate the model. A long term relationship was found between the health expenditures per capita and GDP per capita, the proportion of population below 15 and above 65 years old, number of physicians, and urbanisation. Besides, all the variables had short term relationships with health expenditures, except for the proportion of population above 65 years old. The coefficient of GDP was below 1 in the model. Therefore, health is counted as a necessary good in ECO countries and governments must pay due attention to the equal distribution of health services in all regions of the country.