Public expenditures on health and pensions in OECD countries

: their simultaneous estimation

Abstract

This dissertation aims to explore the simultaneous determination of public expenditures on health and old-age pensions regarding 31 high-income OECD countries during the period 1990-2011. To take into account that each country and year can´t be treated as homogenous, the thesis uses a panel data model with country and year fixed effects. Regarding pensions and health individual determination, it was verified through an OLS regression with Dummy Variables, that GDP is the most important determinant of health expenditures and that it also has a strong impact on old-age pensions expenditures. Given that old-age pensions expenditures have a statistically significant impact on health expenditures and vice versa, a 2SLS model was used in order to estimate this simultaneous determination. Per capita pensions expenditures have a positive and robust impact on health expenditure per capita mainly because pensions expenditures will redistribute income for those that have a larger propensity to spend on health. Additionally the expectations of the future pensions payments serve as an incentive to invest in living longer. (Yonghong An 2015) The impact on pensions expenditures of expenditures on health was not so clear. The impact is positive and significant, but the instruments for health used in the pensions 2SLS equation, though relevant, seem not to be strong enough to totally validate this causality relation. If true, this relation would indicate that when the Government invests in health, invests in a higher life expectancy which means that also it will have to pay for pensions during a longer period.

Date of Award	18 Jul 2017
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Miguel Gouveia (Supervisor)