Investigating Health Determinants in OECD Countries: A Random Effects Analysis

Abstract

In previous literature, there has been contradicting results regarding what indicators serve as determinants of health. This paper re-examines the health production function by using the economic theory of production to establish factors to include in regression analysis. Data from 30 OECD countries from the years 1999 to 2005 were used to estimate a multiplicative random effects model explaining the variation in life expectancy due to health expenditure, health worker quantities, and other environmental and lifestyle factors. In addition to providing a basis for which the cost of life can be examined, the results indicate that physicians have a significant impact on health, but nurses do not. Furthermore, the capital-labor tradeoff suggests the average OECD health system in the study had an extremely inefficient allocation of inputs.