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.
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:6578 |
| Date | 10 October 2018 |
| Creators | Shaikh, Mujaheed, Gandjour, Afschin |
| Publisher | John Wiley & Sons Ltd |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, PeerReviewed |
| Format | application/pdf |
| Rights | Creative Commons: Attribution 4.0 International (CC BY 4.0) |
| Relation | https://doi.org/10.1002/hec.3832, https://onlinelibrary.wiley.com/, http://epub.wu.ac.at/6578/ |
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