Health-care expenditure, GDP and share of the elderly in Japan: a panel cointegration analysis

By employing a panel data set of 47 prefectures in Japan, this article investigates the cointegrating relationship between health-care expenditure, GDP and population share of the elderly by using panel cointegration tests developed by Pedroni (1999). Our empirical result shows that there is a cointegrating relationship between the three variables. We also estimate the effects of GDP and share of the elderly on health-care expenditure by employing the group-mean fully modified ordinary least-squares (FMOLS) method of Pedroni (2001) and find that the coefficient on the share of the elderly is positively significant. These findings highlight the importance of addressing the issue of an ageing society to curb rising health-care expenditures in Japan.