Vasudeva N. R. Murthy

Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture

Per capita real income on the demand-side and technological change, proxied by total R&D and health R&D spending, on the supply-side are hypothesized as major drivers of per capita real health care expenditure in the US during the 1960-1997 period. The findings are robust to a battery of unit root and cointegration tests. They support the Newhouse [Journal of Economic Perspectives 6 (1992) 3] conjecture that technological change is a major escalator of health care expenditure and confirm a significant and stable long-run relationship among per capita real health care expenditure, per capita real income and broad-based R&D expenditures. Policy implications are noted.

Foreign aid and economic growth in Cameroon: Evidence from cointegration tests

Mbaku (1993, 1994) presents empirical evidence to support the hypothesis that in Cameroon, during 1971-90, foreign aid had no impact on economic growth. In this note, we apply the recent technique of unit-root testing and Johansens maximum likelihood procedure to show, on the contrary, that foreign aid had a positive contribution to economic growth in Cameroon during the period under study. We attribute the differences in the results to the differences in methodology, and the implied optimal lag structure in our study. We contend that cointegration tests are warranted in studies of this nature, before any structural analysis and policy implications of the model, are derived.

Population health status and economic growth in Chinese provinces: some policy implications

Using recent cross-sectional, public use, data set on 31 Chinese provinces, we empirically model the core determinants of life expectancy (population health status) using the Ordinary Least Squares (OLS) method, instrumental variables estimation and the relatively more efficient Hubert robust estimator. The empirical regression model results and diagnostic tests indicate that the core determinants of life expectancy are the real GDP per capita, illiteracy rates and daily visits to physicians. Using results of the robust regression estimator (mimic the instrumental variables model estimation), the statistically significant elasticities of life expectancy are 0.033 (t-ratio = 2.45) with respect to per capita real GDP, 0.41 (t-ratio = 2.54) with respect to daily visits to the physicians and is −0.026 (t-ratio = −2.26) with respect to the illiteracy rate. That is, income and daily visits to physicians are positively linked to life expectancy while the illiteracy rate stifles life expectancy production. Our findings are consistent with received theories. Policy implications are explored.

Are stock prices in the US nonstationary? Evidence from contemporary unit root tests

This article extends the empirical literature on the efficiency of stock markets in the US by applying a battery of unit root tests to empirically ascertain whether stock prices are mean reverting. This article, unlike previous studies, employs a disaggregated approach using the daily closing values of the Dow Jones industrial average, NASDAQ composite and S&P 500 index covering the period 5 February 1971 to 31 December 2009 to investigate the integration properties of the US stock market. The empirical findings reveal that the three major stock price series are nonstationary, indicating that they do not follow a trend path. The primary implication is that trading strategies that simply rely on mean reversion of stock prices are valueless.