Is post-communist health spending unusual? A comparison with established market economies

What factors determine a country's spending on health? And what factors det ermine the share of spending financed by the public sector? Taking these fa ctors into account, is post-communist health spending unusual? For the OECD economies, we find that per capita health spending is strongly related to per capita income, with an elasticity of about 1.5. The elasticity for deve loping economies is close to one. Spending is also positively related to th e elderly dependency rate, but the relationship is weaker than a static com parison of spending by the elderly and non-elderly would suggest. Even thou gh health spending as a share of GDP in the post-communist countries of eas tern and central Europe is below the OECD average, there is evidence of abo ve normal health spending in most countries when we control for income and demographics. For Hungary, the 'excess' spending reached over three percent age points of GDP in 1994. For the OECD sample, four development indicators account for half the variation in the public sector share of total health spending. Political variables help explain the remainder. If the post-commu nist countries converge to the market economy pattern, the share of public financing will fall, yet still remain well above half. JEL classification: H51, I11, P30, P51.