Is the health care price inflation in US urban areas stationary? Evidence from panel unit root tests

• Autores: Murthy, Vasudeva, Okunade, Albert
• Formato: artículo
• Fecha de Publicación: 2018
• Institución: Universidad ESAN
• Repositorio: ESAN-Institucional
• Lenguaje: inglés
• OAI Identifier: oai:repositorio.esan.edu.pe:20.500.12640/2589
• Enlace del recurso: https://revistas.esan.edu.pe/index.php/jefas/article/view/113; https://hdl.handle.net/20.500.12640/2589; https://doi.org/10.1108/JEFAS-02-2017-0043
• Nivel de acceso: acceso abierto
• Materia: Cross-sectional dependence; Health-care price inflation rate; Multiple structural breaks; Panel unit root tests; Dependencia transversal; Tasa de inflación de los precios de la atención médica; Rupturas estructurales múltiples; Pruebas de raíz unitaria de panel; https://purl.org/pe-repo/ocde/ford#5.02.04

Purpose – This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006. Design/methodology/approach – This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence. Findings – The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process. Research limitations/implications – The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study’s conclusions do not apply to non-urban areas. Practical implications – The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting.