Convergence of Total Health Expenditure as a Share of GDP: Evidence from Selected OECD Countries

This paper studies convergence in the ratio of total health expenditures to GDP (HEGDP) for a sample of OECD countries over the period 1960-2006. Stochastic convergence is tested using unit root tests, without and with a structural break. Moreover, beta-convergence is examined by applying a method that allows for a structural break and is robust to the presence of unit roots and serial correlation in the errors. We examine whether these countries (1) are converging to the US in terms of HEGDP and (2) share a common structural break. The results support the existence of stochastic convergence for all countries. beta-convergence, however, is supported for some countries only before the break points (regime 1). In regime 2 (the period after the break points) all countries are experiencing divergence. In addition, the estimated break dates are clustered around 1981 and 1988.