An initial investigation and analysis of healthcare expenditures in Hong Kong

Abstract

Hong Kong is a special administrative region of the People’s Republic of China, governing with a high degree of autonomy since its handover from British rule in 1997. Like its legal, economic, and political systems, it has a unique system of healthcare. But the determinants of healthcare expenditure in Hong Kong, for all their complexities, have not been studied in the literature. This paper will make an attempt at quantifying the effects of these determinants. The latest data is used from the World Development Indicators and local government bureaus, departments, and offices. Ordinary least squares regressions are run with a model, constructed from widely-used models, based on the gross domestic product, the unemployment rate, supply and demand factors of healthcare, and research and development (R&D). Significant coefficients are found for all covariates, depending on the specification. Infant mortality rate and R&D, moreover, have negative relationships with healthcare expenditure. The methodology replaces time-fixed effects as a proxy for medical technology with R&D expenditure in a non-panel dataset setting. Unemployment rate is rarely considered as a determinant, but is used in this model. Hong Kong’s healthcare income elasticity is 0.824, indicating that healthcare in Hong Kong is not a luxury good.