Health expenditure and Real disposable Income in the ECCAS: A Causal Study using spatial panel approach

This paper examines the long-run economic relationship between health care expenditure and income in Economic Community of Central African States observed over the period 1995-2014. Particularly we study the non-stationarity and cointegration properties between health care spending and income, ultimately measuring income elasticity of health care. This is done in a panel data framework controlling for both cross-section dependence and unobserved heterogeneity. Specifically, in our regression equations we assume that the error is the sum of a multifactor structure and a spatial autoregressive process, which capture global shocks and local spill overs in health expenditure. Our findings reveal that the majority of the countries presents an income elasticity lower than one, confirming that health care is a necessity good