Abstract
Technology is perceived as a key factor driving the increase in per capita healthcare expenditure. We assess this effect between 1981 and 2019 for a panel of OECD member countries using a panel error correction model, which was estimated using the dynamic common correlated effect approach of Chudik and Pesaran (J Econom 188(2):393–420, 2015). 10.1016/j.jeconom.2015.03.007. Results corroborate previous findings that medical technology and healthcare expenditure follow a long-run relationship. Incorporating heterogeneity and controlling for cross-sectional dependence and endogeneity reveals substantial variation in medical technology’s effect across OECD member countries. Overall, medical technology is a key factor in driving the increase in per capita healthcare expenditure for less than half of the panel of OECD member countries. This finding is consistent across three different technology proxies and suggests that policymakers should utilize country-specific coefficients to inform decisions.
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The data used in this paper was obtained from publicly available sources, and it is available from the corresponding author by request.
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The Stata code is available from the corresponding author by request.
Notes
Government financing is commonly termed public or compulsory, and the portion paid by the patient is commonly termed private, out-of-pocket, or voluntary.
We gratefully acknowledge the discovery of this proxy through interdisciplinary dialogue with Dr. Tyler Grant, who is the Director of Engineering at Lyndra Therapeutics Inc. and previously a postdoctoral fellow at Langer Lab at MIT.
Note that for CTR, one of the proxies included under \(\mathrm{TECH}\), the subscript i is redundant since CTR is common across units of analysis.
When the medical technology proxy is common for all units in the panel (CTR), these units should be considered as an observed common factor in our model (as opposed to the cross-sectional averages of all other model variables, which capture unobserved common factors).
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Acknowledgements
We gratefully acknowledge the valuable feedback and advice of the two anonymous referees, Dr. Gregory Mason, Dr. Alan Katz, Dr. Umut Oguzoglu, Dr. Michael Grignon, and the interdisciplinary dialogue with Dr. Tyler Grant who is the Director of Engineering at Lyndra Therapeutics Inc. and previously a postdoctoral fellow at Langer Lab at MIT.
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Rodriguez Llorian, E., Mann, J. Exploring the technology–healthcare expenditure nexus: a panel error correction approach. Empir Econ 62, 3061–3086 (2022). https://doi.org/10.1007/s00181-021-02125-0
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DOI: https://doi.org/10.1007/s00181-021-02125-0