Is Health a Luxury for People in the Middle East Countries? Evidence from Panel Smooth Transition Regression Models

In this article, we used a panel smooth transition regression model to estimate the relationship between health expenditure and income. This approach is employed to continuously model changing parameters among countries and during time. It is thus suitable for eliminating heterogeneity among countries and the variability of the relationship between gross domestic product (GDP) and health expenditure. The purpose of this study was to determine whether health care is a luxury product in the Middle East. The data included a panel of time series and cross-sectional observations in 14 Middle East countries during the 1990-2006. The data was collected from the World Health Organization (WHO) and World Development Indicators (WDI, 2008). The results were analyzed using EViews. the results showed that in most countries, income elasticity is less than unity. It seems that the relationship between income and health expenditure is affected by the advancement in technology among different countries. The estimates for all countries indicated that the income elasticity of health expenditure for the years 1975-2006 had continuously increased. The technological change is one of the main factors that affect health expenditure growth in the Middle East. Hence, health policy makers should consider the increase in health expenditure ratio along with technology growth in their programs.