Does disaggregation affect the relationship between health care expenditure and GDP? An analysis using regime shifts

This paper investigates the impact of policy shifts on disaggregated health expenditure-GDP relationship in Australia. In contrast to previous studies the disaggregation is at the level of type of service delivered and not at the level of source of expenditure. Our results show that the subcomponents of health expenditure exhibit different patterns of behaviour at both cointegration and unit root stages once policy shifts or structural breaks are allowed in the empirical analysis. When the possibility of structural break is allowed we find a significant long-run relationship between subcomponents of aggregate health expenditure and GDP that is not observed when break is not allowed. The underlying reasons for the occurrence of breaks and policy lessons are discussed subsequently