A note on cointegration of health expenditures and income

Utilizing a panel data set of 50 US states, this note investigates nonstationarity and cointegration of health care expenditures and gross state products (GSP). Both the individual state-based method and the recent panel data method are applied. Allowing for structural breaks in the test, we find that health care expenditures and GSP are both nonstationary. The evidence also suggests that the two series form a cointegrating relationship. The income elasticities of health spending vary over states and became smaller in the 1990s.