Return to search

Pharmaceutical expenditure and gross domestic product: Evidence of simultaneous effects using a two-step instrumental variables strategy

This paper estimates the income elasticity of government pharmaceutical spending
and assesses the simultaneous effect of such spending on gross domestic product
(GDP). Using a panel dataset for 136 countries from 1995 to 2006, we employ a
two-step instrumental variable procedure where we first estimate the effect of
GDP on public pharmaceutical expenditure using tourist receipts as an instrumentforGDP.
In the secondstep,weconstructanadjusted pharmaceutical expenditure
series where the response of public pharmaceutical expenditure to GDP is
partialled out and use this endogeneity adjusted series as an instrument for pharmaceutical
expenditure. Our estimations show that GDP has a strong positive
impact on pharmaceutical spending with elasticity in excess of unity in countries
with low spending on pharmaceuticals and countries with large economic freedom.
In the second step, we find that when the quantitatively large reverse effect
of GDP is accounted for, public pharmaceutical spending has a negative effect
on GDP per capita particularly in countries with limited economic freedom.

Identiferoai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:6578
Date10 October 2018
CreatorsShaikh, Mujaheed, Gandjour, Afschin
PublisherJohn Wiley & Sons Ltd
Source SetsWirtschaftsuniversität Wien
LanguageEnglish
Detected LanguageEnglish
TypeArticle, PeerReviewed
Formatapplication/pdf
RightsCreative Commons: Attribution 4.0 International (CC BY 4.0)
Relationhttps://doi.org/10.1002/hec.3832, https://onlinelibrary.wiley.com/, http://epub.wu.ac.at/6578/

Page generated in 0.0019 seconds