IS HEALTH-CARE REALLY A LUXURY

Much of the work which has led to a widely held view that the income e lasticity of health care spending exceeds one has been based on intern ational cross-section data, or on pooled cross-sections and time serie s. In this paper we re-examine this view in the context of long-run eq uilibrium relationships between non-stationary time series, possibly i ncluding autonomous trends. Our results cast doubt upon the usefulness of pooling and upon the notion of an elasticity above one.