Health Expenditure Research Paper

THE DETERMINANTS OF HEALTH EXPENDITURE IN MALAYSIA
MOHD FAIZ BIN JUFREE

2014928113
BACHELOR OF BUSINESS ADMINISTRATION

WITH HONOURS (FINANCE)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
KAMPUS BANDARAYA MELAKA
JANUARY 2017
THE DETRMINANTS OF HEALTH EXPENDITURE IN MALAYSIA
MOHD FAIZ BIN JUFREE
2014928113
Submitted in Partial Fulfilment of the
Requirement for the
Bachelor of Business Administration with Honors (Finance)
FACULTY OF BUSINESS MANAGEMENT
UNIVERSITY TECHNOLOGY MARA
MELAKA
JANUARY 2017
DECLARATION OF ORIGINAL WORK
BACHELOR OF BUSINESS ADMINISTRATION WITH
HONOURS (FINANCE) FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA
“DECLARATION OF ORIGINAL WORK”
I, Mohd Faiz B Jufree, 93062114622.
Hereby, declare that:
 This work has not previously been accepted in substance for any degree, locally or
overseas, and is not being concurrently submitted for this degree or any other degrees.
 This project-paper is the result of my independent work and investigation, except where
otherwise stated.
 All verbatim extracts have been distinguished by quotation marks and sources of my
information have been specifically acknowledged.


Signature: Date:
LETTER OF SUBMISSION
JANUARY 2017
DR. HALIMAHTON BINTI BORHAN
Lectrure
Bachelor of Business Administration (Hons) Finance
Faculty of Business Management
Universiti Teknologi MARA
75300 Melaka
Dear Madam,
SUBMISSION OF PROJECT PAPER
Attached is the project paper titled THE DETERMINANTS OF HEALTH EXPENDITURE IN
MALAYSIA to fulfill the requirement as needed by the Faculty of Business Management,
Universiti Teknologi MARA.
Thank you.
Yours sincerely,
MOHD FAIZ B JUFREE

2014928113
BACHELOR OF BUSINESS ADMINISTRATION WITH HONOURS (FINANCE)
TABLE OF CONTENTS
Page
TITLE PAGE i
DECLARATION OF ORIGIN WORK ii
LETTER OF SUBMISSION iii
TABLE OF CONTENTS iv
LIST OF FIGURES vii
LIST OF TABLES vii
LIST OF ABREVIATION viii
ACKNOWLEDGEMENT ix
ABSTRACT iix
CHAPTER 1 INTRODUCTION
1.0 Introduction 1
1.1 Background of Study 2-5
1.2 Problem Statement 5-9
1.3 Research Question 9-10
1.4 Research Objective 10-11
1.5 Hypothesis of study 11-12
1.6 Limitation of study 13
1.7 Significant of study 14-15
1.8 Conclusion 16
CHAPTER 2 LITERATURE REVIEW
2.0 Introduction 17
2.1 Review of the literature 17
2.1.1 Health Expenditure 17-18
2.1.2 Real per capita gross domestic product 19-20
2.1.3 Proportion of population age 65 above 20-22
2.1.4 Life expectancy 22-24
2.1.5 Infant mortality rate 24-25
2.1.6 Public Expenditure 25-26
2.2 Conclusion 26
CHAPTER 3 RESEARCH METHODOLOGY
3.0 Introduction 27-28
3.1 Research Design 28-29
3.2 Theoretical Framework 29-30
3.3 Data Collection Method 31-32
3.4 Data Analysis 32-44
3.5 Variable 45
3.6 Conclusion 46
CHAPTER 4 FINDINGS
4.0 Introduction 47
4.1 Diagnostic Checking of Multiple Linear Regression 48-50
4.2 Unit root test 51-54
4.3 Descriptive Statistic 55-56
4.4 Interpretation of multiple linear result 57-62
4.5 Conclusion 63
CHAPTER 5 CONCLUSION AND RECOMMENDATION
5.0 Introduction 64
5.1 Summary of statistical analysis 64-67
5.2 Discussion Major Finding 68-71
5.3 Implication of Study 71-72
5.4 Recommendation 72-74
5.5 Conclusion 74-76
BIBLOGRAPHY
APPENDIXES
LIST OF FIGURE
Figure: Page
Figure 3.2.1 Diagram of theoretical framework 22
LIST OF TABLES
Table: Page
Table 4.1.1 Summary of diagnostic checking Multiple Linear Regression 33
Table 4.2.1 Augmented Dickey Fuller 36
Table 4.2.2 Phillips Perron 37
Table 4.2.3 Kwiatkowski-Phillips Schmidt Shin 38
Table 4.3.1 Descriptive Statistic 39
Table 4.4.1 Interpretation of Multiple Linear Regression 44

LIST OF ABREVIATIOS
ADF : Augmentted Dickey-Fuller
PP : Phillips-Perron
KPSS : Kwiatkowski-Phillips-Schmidt-Shin
HE : Health Expenditure
GDP : Gross Domestic Product
A65 : Proportion of population age 65 above
LE : Life Expectancy
IMR : Infant Mortality Rate
PE : Public Expenditure
ACKNOWLEDGMENT
Assalamualaikum w.b.t
All thanks is due to Almighty Allah, the compassionate and merciful, who knows about whatever
there is in the universe, hidden and evident, and has enabled us to elucidate a drop from the
existing ocean of knowledge.
We have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals. We would like to extend our sincere thanks to all of them.
We are highly indebted to Dr. Halimahton Binti Borhan for her guidance and constant
supervision as well as for providing necessary information regarding the project and also for her
support with kindness, sympathy and academic enthusiasm. Her forceful comments and
meticulous directions were a constant source of inspiration to my research in completing the
project.
We would like to express our gratitude towards our parents and member for their kind co-
operation and encouragement which help us in completion of this project.
We would like to express our special gratitude and thanks to industry persons for giving us such
attention and time.
We also would like to thanks to the contribution of our faculty - Faculty of Business
Management (Finance). Apart from that, we hope that all the information and data that we have
gathered here will increase the knowledge of anyone who will be accessing it regarding the study
on the “The Dterminants of Health Expenditure in Malaysia”. It would be a great honor to us if it
is used as a reference or for any other good cause.
Lastly, our thanks and appreciations also go to our colleagues in developing the project and
people who have willingly helped us out with their abilities.
Thank you.
ABSTRACT
This paper analyzed the determinants of health expenditure in Malaysia. The study used
Multiple Linear Regression Model to determined significant relationship between gross domestic
product, proportion of population age 65 above, life expectancy, infant mortality and public
expenditure towards health expenditure in Malaysia, which covering data for 30 years from
1985 until 2015 which contain 31 observation. The empirical results have found that all of the
variables was significant relationship towards health expenditure in Malaysia. This result give
additional understanding of the relationship between these independent variables and health
expenditure in Malaysia.
“THE DETERMINANTS OF HEALTH EXPENDITURE IN MALAYSIA”
CHAPTER 1
INTRODUCTION
1.0 INTRODUCTION
Chapter 1 includes of the brief introduction on this topic study, it begins from the big
picture narrowing down to the field for which studies focus on. The several previous
studies have been done on health expenditure definition and also explained on how it
works. The determinants of health expenditure brought on to a selected country
which is Malaysia will be discussed in this chapter. Besides, this chapter also
introduced the problem statement regarding the health expenditure in Malaysia and
relation with the independent variables. Then, the study objectives also explained
with more depth as studies go further into this topic. In addition, specific research
questions and research objective on this topic study also be written down accordingly.
The importance and contributions of the study will be discussed under the sub topic of
significance. The outline on each chapter will be briefly before the end of this
chapter. This study will have 5 chapters including; research overview, literature review,
methodology, data analysis and discussion, conclusion, and implications. Lastly, the
summary and linkage to the next chapter which is literature review will explain in
chapter 1.
1
1.1 BACKGROUND OF THE STUDY
For years, the idea of "evil circle of poverty and disease" was known in the health and
economic societies. Efforts of economics establishers as official doctrine started in
the 1950s when the issue of the financing of health sectors and the health care was
mentioned and health was considered as an "industry”. Applying economic ideas in
health economics is a relatively new branch that started by the 1970s. Meanwhile,
Asefzadeh found that the first International Conference on health economics have
been on 1973 in his study (Asefzadeh, 2010).
For those improvement of a country‟s economy, its people have tendency to put more
value on nature, hence need a higher interest to medicinal services especially in
developed countries with higher national income. Past studies investigated that
health care expenditure has affected by economic development. Previously, most of
the developed countries increase in their health care expenditure that affected the
economic growth (Kuan, 2011).
The per capita gross domestic products (GDP) become one of the factors to determine
the health expenditure in Malaysia. Since 1960s, all developing countries has been
respectable worry regarding the expanding the proportion of gross domestic product
from claiming GDP committed with health expenditure using in light of huge numbers
of researcher concentrated on this variables. Haider, (2007) also stated that GDP is the
most influential on health expenditure. There are a number about conceivable
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purpose behind a positive relationship the middle of GDP and the health expenditure.
First, expanded income means that there is more cash to spend on health care
expenditure sectors. Next, more health expenditure may lead to better health status,
which might thus reason increase income. Specialists in good health status are more
profitable and hence the economy as well as individuals has more income (Haider,
2007). Wagner (1883) found that, when the per capita income of a country increased,
the government would increase its expenditure on health. This may be prominently
known as Wagner‟s law, under which GDP growth affected the increasing public
expenditure.
Besides, this study also examines the relationship of proportion of population aged
more than 65 years old in Malaysia. Referring to the Di Matteo (1998), the real
determinants of health expenditure expense are real per capita income, population
over age 65 and real provincial per capita federal transfer revenues. The income
versatility of 0.77 demonstrates that health care in Canada is not a luxury good. The
proportion of the population aged 65 and above is classified as the elderly population.
Aljunid(1997) stated that a few authors have provided some definition of aging, such
as the regression of physiological function accompanied by advancement of age and
the progressive accumulation of changes with time associated with or responsible, for
the ever increasing susceptibility to disease and death with accompanying aging. On
the other hand, Aljunid found a report made by the United Nations in 1993 that stated
a country is said to be aged when at least 7 percent of the population is elderly. The
elderly spend more on medical care than young people, so when the percentage of the
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elderly population in a country rises, then the aggregate health care expenditure rises
as well (Aljunid, 1997).
Then, in this paper also examine the relationship between health care expenditure and
life expectancy. The establishment of economics lies in the allocation of scarce
resources. Thus, this study expects that whether a state is using cash looking into a
great or services, it will be allocating itself a important asset. Because of this, it
would assume that, logically, health care expenditure would result in some kind of
health benefit. Thus, it anticipates that a build in health care expenditure to indicate a
higher quality of health, quantified in the model through the use of life expectancy.
Examining this relationship is important because it will allow for a greater
understanding of the effectiveness of public expenditure on health (Desphande, Kumar,
Rammaswami, 2014).
Economic development may be never again bound with a transform for constant
increase in per capita income. Diverse estimation is presently seen as focal
viewpoints about this procedure which is the most notable of them are upgrades in
health and education Anand, Ravallion (1993). Furthermore, youngsters are among
the most critical health issues. In this regard, infant mortality rate are widely used as
credible measure of health expenditure (Bond, 1991). Receptive information for
these rates shows dramatic decline over the last century in all developed countries. The
similar pattern has been also recognized in the developing countries since the World
War II, though the picture of the latter group of countries is less bright than that of the
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former one Arellano, Bond (1991). According to WHO (2010), public health
expenditure use comprises about repetitive and capital expenditure from government
budgets, external borrowings and grants (including donations from international
agencies and NGOs), as well as compulsory health insurance funds. History is a
witness that important achievement in public health, diseases control and organized
nutritional intake has given rise to great takeoffs in economic development.
Therefore this study is about how health expenditures in Malaysia are affected and
how they respond to any one determinant that can make it volatile. Its play a role as a
guidelines or references to the Ministry of Health and appropriate organizations were
can improve health care service in Malaysia.
1.2 PROBLEM STATEMENT
Recently, most of the study such as Gerdthan and Johnson (1992), Newhouse (1977),
Matto (2005), Fujino (1987), Nurudeen and Usman (2010), and Judge (1995) have
been mentioned about the relationship or significance of the determinants of health
expenditure among region and country. Therefore, it is reasonable to state that the
real per capita gross domestic product (income), proportion of population age 65
above, life expectancy, infant mortality rate, and public expenditure also have their
relationship among themselves to the health expenditure in Malaysia.
The role of health expenditure on economic development has been supported by
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Mushkin (1962). Those writer found that health is capital and thus investment should
be a prominent source for economic development. This principle need pulled in those
premium of analyst and more consequently produced volminous experimental
investigations through the most recent few decades. Several studies such as Newhouse
(1987), Parkin (1987) and Wang and Rettenmaier (2007) have investigated this theory.
In the middle of 1980s, the world economic recession affected the economic growth in
Malaysia. The result showed, the expenditure on health over the period of 1988 to
1997 increase between 16.6 per cent to 23.8 per cent of the government expenditure in
Malaysia (Tang, 2010). Furthermore, in this manner of apprehensions developing
starting with Severe Acute Respiratory Syndrome (SARS) and Avian flu, the health
expenditure in Malaysia expanded from 17.7 per cent in 2001 to 32.4 per cent to
prevent and control the spread from claiming these infections. Moreover, the members
of ASEAN nations including Malaysia bring cooperated in providing public
information and education to improve health care policy in order to contain the
spreading of these disease (ASEAN‟s Health Ministrers, 1980).
One of the primary issues done Malaysia is a continuation of the procurement for
health care that is approachable should the all income groups, particularly when
Malaysia‟s population will be at presence developing in spite of progressively ageing
over time, climbing for per capita incomes, changing disease patterns, and expense of
giving health care is rising (Onn, 2015). Leng (2014) stated that mortality rates will
decrease if health facilities improved, new challenges emerged to increase pressure on
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the health services that impact on health expenditure. From 1960 to 2013, the
population of Malaysia increase from 8.3 million to 29.72 million, with an expanding
proportion of urban population, older people, and migrants. These pressures were
affected the trend toward heart disease and other chronic illnesses. Societal changes
such as an increase in household incomes, improvements in technology, and rising
expectations, were also important contributors to increasing the health expenditure
(Leng, 2004).
Increase in life expectancy achieved through diminished on infant and child mortality
has significantly contributed to the overall gains in health expenditure in Malaysia
during the twentieth century, both within and across countries Cutler, (1997),
Nordhaus (2003), Murphy (2003), and Becker (2005). Reductions in infant and child
mortality and heath improvements in general have customarily been joined to income
growth.
Another issues clinched alongside confronting those Malaysian health system that
affected health expenditure at present will be in the change for manageable strategy
to deliver evolving health care needs of the population. At the central level, there
would bring down consultations for other ministries and other stakeholders in health
services in improved of such strategies. As such, whenever new policies were
introduced and implemented, ordinarily these policies neglected to address important
issues that might affect the provision of quality and efficient services at the ground
level. Often the policies were not able to reflect the demand and need of the local
7
population (MOHM, 2013).
The other issues facing the public health care sector in Malaysia is the proportion of
older people is set to increase throughout the following couple of decade. This issues
with expanding cost of medication and equipment, rising demand of quality health
care and sophisticated equipment and changing patterns of diseases will affected the
higher health expenditure in future (Ren, 2000). According to Onn 2015, Malaysia‟s
population will be ageing and its yearly birth rates have been dropped although
its population is present increasing. This may be anticipated to push additional
pressure on its health care resources because Malaysians will be living more. It is
projected that Malaysia‟s proportion of population 65 years old and above will climb
to 11.4 per cent of the total population by 2040 (Onn, 2015).
It can be concluded that expenditure on health in Malaysia is still very low contrasted
with different developed nations in the world. The most recent evaluate may be at 4.4
per cent of GDP, 53 per cent of which public contribution and the remaining 47 per
cent are private expenditure, primarily through out-of-pocket expenditure (MOHM,
2013). Ministry of health gained only 7.7 per cent of the government-operating
budget, which no route nears the government expenditure on education which 23.5 per
cent and defense which 12.1 per cent. In this way government is attempting on
enhance the national health expenditure system based on social health insurance due
to the high out-of-pocket (MOHM, 2013).
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The purpose of this study is to let Malaysian examine the factors that give impact to the
health expenditure. The factor that have been chosen can be defined as a major factor
which can give deeply impact to the changes of health expenditure in Malaysia which
are real per capita gross domestic product, proportion of population aged more 65, life
expectancy, public expenditure, and infant mortality. Therefore, this study is going to
examine the determinants of health care expenditure in Malaysia from 1985 - 2015.
1.3 RESEARCH OBJECTIVE
The general objective is to examine the relationship between real per capita health
expenditure and the independent variables in Malaysia from 1985 - 2015.
1.3.1 Specific Objectives
i. To examine the significant relationship of real per capita gross
domestic product and real per capita health expenditure in
Malaysia from 1985-2015.
ii. To investigate the significant relationship of proportion of
population age more than 65 years old and real per capita health
expenditure in Malaysia from 1985-2015.
iii. To analyze the significant relationship of life expectance and real
per capital health expenditure in Malaysia from 1985-2015.
9
iv. To determine the significant relationship of infant mortality and
real per capita health expenditure in Malaysia from 1985-2015.
v. To examine the significant relationship between public expenditure
on health care in total health care expenditure in Malaysia and real
per capita health expenditure in Malaysia from 1985-2015.
vi. To determine the variables that contribute the most impact to the
real per capita health expenditure in Malaysia from 1985-2015.
1.4 RESEARCH QUESTIONS
i. Is there any significant relationship between real per capita health
expenditure and at least one of the independent variables in Malaysia from
year 1985-2015?
ii. Is there any significant relationship between real per capita gross domestic
product and real per capita health expenditure in Malaysia from 1985-
2015?
iii. Is there any significant relationship between proportion of population age
more than 65 years old and real per capita health expenditure in Malaysia
from 1985-2015?
iv. Is there any significant relationship between life expectance and real per
capital health expenditure in Malaysia from 1985-2015?
10
v. Is there any significant relationship between infant mortality and real per
capita health expenditure in Malaysia from 1985-2015?
vi. Is there any significant relationship between public expenditure on health
care in total health care expenditure in Malaysia and real per capita health
expenditure in Malaysia from 1985-2015?
vii. Which variable that contribute the most impact to the real per capita health
expenditure in Malaysia from 1985-2015.
1.5 HYPOTHESIS OF THE STUDY
H0: There is no sigificant relationship between real per capita gross domestic
product and real per capita health expenditure in Malaysia.
H1: There is significant relationship between real per capita gross domestic product
and real per capita health expenditure in Malaysia.
H0: There is no significant relationship between proportion of population age more
than 65 years old and real per capita health expenditure in Malaysia.
H2: There is significant relationship between proportion of population age more
than 65 years old and real per capita health expenditure in Malaysia.
H0: There is no significant relationship between life expectance and real per capital
health expenditure in Malaysia.
H3: There is significant relationship between life expectance and real per capital
11
H0: There is no significant relationship between infant mortality and real per capita
H4: There is significant relationship between infant mortality and real per capita
H0: There is no significant relationship between public expenditure on health care
in total health care expenditure in Malaysia and real per capita health
H5: There is significant relationship between public expenditure on health care in
total health care expenditure in Malaysia and real per capita health
H0: The health expenditure in Malaysia has no significant relationship with the
independent variables namely, Gross domestic product(GDP), Proportion of
population Age 65 above(A65), Life Expectancy(LE), Infant Mortality
rate(IMR), and Public Expenditure(PE).
H6: The health expenditure in Malaysia has significant relationship with the
independent variables namely, Gross domestic product(GDP), Proportion of
population Age 65 above(A65), Life Expectancy(LE), Infant Mortality
rate(IMR), and Public Expenditure(PE).
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1.6 LIMITATION OF STUDY
As we know that, this paper project was given during the internship and had been
given almost four month to finish it. But for further analysis of the study, it needs
more than four month to investigate determinants of health expenditure in Malaysia
due to lack of knowledge. From that, it becomes challenge in undertaking the study
to reach the goal that this study aims.
A part of challenge is when there are many complicated information and insufficient
data that must be include in the research. Furthermore, the data constrains is refers
to difficulty to find sources of the study that related with the main title which is
determinants of health expenditure in Malaysia. Besides that, in internet, there is
not much data provided where the most proven data are majority taken from Data-
stream of UiTM Bandaraya Melaka. In addition, not all the studies were carried out
over than 50 data. Thus, the data given that use in this paper are also only limited to
the topic study which is real per capita gross domestic product, proportion of
population aged more than 65 years old, life expectancy, infant mortality and public
expenditure on health care in total health care expenditure in Malaysia.
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1.7 SIGNIFICANT OF THE STUDY
Determinant of health expenditure is a popular topic among the researchers. Even
though there have been many previous studies done on the determinants of health
expenditure in Malaysia, in this case, this study have added a relatively new
variables which are infant mortality into the model in order to find out whether the
infant mortality affects the health expenditure of Malaysia. There have not been
many researches that include infant mortality as an independent variable in the
examination of the determinant of health expenditure in Malaysia.
With the establishment of the Maternal and Child Health and Health Education Unit
in the Ministry of Health in 1971, primary health care package was easily
implemented and monitored. Infant and Maternal mortality data which correspond
with the poverty levels of the various states facilitated and allowed greater
justification for a more equitable division of resources. These „rural states‟ in the
early 70 and 80s such as Sabah, Sarawak, Kelantan, Terengganu, Kedah, Pahang and
Perlis were given particular emphasis, with greater provision of clinics, hospitals
and human resources (Safura, Raili, Kamaliah, Fauziah, Lee 2007)
Studies on preferences for place of delivery provided data for improvement on in-
service training and on managerial and organizational aspects of services. The
District Specific Approach, Safe Motherhood Strategies, Risk Approach Project,
Child Health and Expanded Programme on immunization to name a few were
14
implemented (Safura, Raili, Kamaliah, Fauziah, Lee 2007).
This study will contributes to Ministry of Health as it give them picture of what are
significantly affecting health expenditure in Malaysia. This study have include
some other important factor like real per capita gross domestic product, proportion of
population aged more than 65 years old, and life expectancy. This study results can
serve as a guideline or reference Ministry of health where can improved patient flow,
timely referrals and appropriate management of pregnant women and high-risk
children with complications, as well as a more friendly, and client oriented service.
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1.9 CONCLUSION
As a conclusion, this chapter was about the introduction of the research project such
as the little of the research, the problem statement, the hypothesis and also the
research questions. From this chapter, type of the research and also independent
and dependent variable were identified which are real per capita health expenditure,
real per capita gross domestic product, proportion of population aged more than 65
years old, life expectancy, infant mortality, and public expenditure on health care in
total health care expenditure. In addition, this study also explained on this research‟s
objective which is to examine the relationship between real per capita health
expenditure and the independent variables in Malaysia. Other than that, this study
also explained on the chapter layout of this study.
In term of contribution, researcher hope this study will provide policymakers with
better understanding of the determinant affecting real per capita health expenditure
so that an appropriate policy can be developed. Based on this chapter, more can be
carried out in the next chapter as chapter one will be the leading chapter or reference
for the other chapters so that they are related with one another.
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CHAPTER 2
LITERATURE REVIEW
2.0 INTRODUCTION
This chapter will explain the previous study that significant to the determinants of
health expenditure. This provides a better understanding of the nature of health
expenditure, real per capita health expenditure, income, proportion of population aged
more than 65 years old, life expectancy, infant mortality and public expenditure on
health care in total health care expenditure. Other than that, the relationship between
the dependent variable and independent variables are studied as well. With the help
of the previous studied models, these studies are able to formulate a new proposed
framework for this study.
2.1 REVIEW OF THE LITERATURE
2.1.1 Health expenditure
Health expenditures are broadly defined as activities performed either by institutions
or individuals through the application of medical, paramedical, and or nursing
knowledge and technology, the primary purpose of which is to promote, restore, or
maintain health (The World Factbook, 2012). Health expenditures occur when
17
money is spent on health goods and services. This spending occurs at different levels
of government, as well non-government entities such as private health insurers and
individuals (Expenditure Publication, 2013)
With the development of a country's economy, its people tend to place greater value on
the quality of life, and therefore have a higher demand for medical services,
particularly in developed countries with higher national income. Previous empirical
studies on the effect of economic development on health care expenditure indicated
that health care expenditure varies widely in different countries with similar levels of
economic development, and is even more different in countries with different levels of
economic development. Kuan (2011) stated that most countries have a trend of
increasing health care expenditure. Thus, increasing health care expenditure is
common among all countries and its affected the economic growth (Kuan, 2011).
Elmi, and Sadeghi (2012) stated that health expenditure can affect economic
development through its effect on human and physical capital accumulation. Since
health care is a major component of human capital investment, increase national
health care expenditure might tend with build labor productivity, quality of life and
general welfare. Health care expenditure has also been credited for prolonging life
expectancy and dropped morbidity and infant rates (Murthy, and Okunade, 2009).
18
2.1.2 Real per capita gross domestic product (GDP)
Many empirical reviews have shown that gross domestic product has a strong impact
on healthcare expenditure. According to Gerdtham and Jonnson (1992) and Hitiris and
Postnett (1992), they found that gross domestic product was one of the most significant
determinants of healthcare expenditure when used corss-sectional OECD data.
It is generally trusted that economic development empowers individuals to live better,
longer live and enjoy good health. Economic development infers climbing for per
capita income and only this expanded income translated under the utilization of a
higher amount of and better quality of nutritious food. Consequently, health as
measured by life expectancy improves with an increase in income (Fogel, 1997).
According to Morand (2015), the state of health in a country affects its economic
development through different views. The country can produce more output with any
given consolidation from claiming skills, physical capital, and technology knowledge
when the health of the general population improves (Morand, 2005).
The previous study such as Newhouse (1987), Parkin (1987) and Wang and
Rettenmaier (2007) have analyzed that income is the most significantly important
variable of international health care expenditure. Most of the empirical studies have
found a strong and significant relationship between health expenditure and income
(Erdil and Yetkiner, 2009). There would no less than two segments through which gdp
will be a consumption of health care expenditures. Firstly, if health expenditure could
be viewed as an investment in human capital, and given that human capital aggregation
19
is an essential source of economic development, an expand in health care expenditure
must eventually influenced to a higher GDP. Secondly, increase in health care
expenditures connected with effective health intervention increases labor supply and
productivity, which extreme increase GDP (Erdil & Yetkiner 2009).
Newhouse (1997) analyzed that income is the most variables in the difference health
care expenditure among developed countries. Furthemore, other studies suggest that
price index and exchange rate may also affected the outcomes. In this way, with a
specific end goal to decrease the expressed impact, Parkin (1987) and Gerdthamand,
Jönsson (1991) adjusted medical cost and national income with a verifiable value
deflator and exchange rate. Parkin (1987) found that the obtaining power record of
medicinal care could reduce the income versatility of medical care. Gerdtham and
Jönsson (1991) found that the income versatility of medical care is significantly
affected by GDP or purchasing power index of medical care. In addition, Culyer
(1990) studied individual OECD nations utilized pooled data and found a significantly
and have positive correlation between health care expenditure and GDP.
2.1.3 Proportion of population aged more than 65 years old
Recently, a change in the demographic nature of the world population has attracted
considerable attention from policy makers. Changes in the demographic nature affect
the number of the ageing population. Population ageing is triggered by an increase in
20
life expectancy rates and a dropped in fertility rates, and it is a common feature of
developed countries. According to demographic projections by the United Nations
Population Division, the share of the aggregate population matured 65 years and over
in more created districts is relied upon to develop from 14.3 percent in 2000 to 25.9
percent in 2050, while the share of the aggregate population matured 15-64 years is
required to decay from 67.4 percent in 2000 to 58.4 percent in 2050. One of the
significant related concerns is the effects of the ageing population on healthcare
expenditure (NurHaiza, NurNaddia, NorAsma, 2015).
Increments health expenditure is partly due to the progressions made in the medications
of endless maladies and surgery. Ageing of the population is a issues for medicine
becouse of the developing number of elderly patients and the numerous ramifications
of this; much co dreariness is expensive, similar to the case with cardiovascular
maladies, growth, incessant renal sickness and diabetes, and their individual
inconveniences (Zweifel, Felder, and Meiers, 1999). Expenditure on health is
important for a country to ensure the health of its citizens. The increase in health
expenditure causes much concern all over the world. The significant factor
influencing health care spending is the percentage of elderly people. The people with
aged 60 above, spend more on medical care than the young, and it is, therefore
intuitively correct to assume that the aggregate health care rises with higher percentage
of elderly population in the country. (Ruggeri, J, 2002).
In addition Murthy and Ukpolo (1994) showed that ageing populations, it is one of the
most significant determinants of healthcare expenditure. The increase of healthcare
21
expenditure of ageing people is affected by health status; in turn, it will have an
influence on the social security of elderly people. Thus, in regards to the
aforementioned issue, this study attempted to empirically investigate the significant
relationship and positive impact of aging on health expenditure in China and India
(Murthy, and Ukpolo, 1994).
Matteo (2005) stated that the factors of real per capita heath expenditures to evaluate
the sway of age distribution, income and period. The variables utilized would accepted
have impacts on health expenditure. The positive relations of health expenditure are
includes income, the proportion of the population age 65 above or under the age 15, the
public expenditure, and urbanizatio. The result suggests that an ageing population
was significant on health expenditures, but the effects are negatively correlation
(Matteo, 2005).
2.1.4 Life Expectancy
Life expectancy may be a standout among the significant key indicator for population
health condition and economic growth of a country. In most developed countries, the
life expectancy of of individuals at birth has expanded over the last few decades.
There is a significant relation between macroeconomics and health expenditure.
A very important component of economic development of a country is its people‟s
state of health. The majority of studies analyzed panel data for developed countries,
22
such as Lichternberg, (2000) Crémieux (2005) and Bayati (2013) found that health
expenditure have a most significant and positive impact on life expectancy and
mortality rate.
Evidence shows that improvement in healthexpenditure increases life expectancy. In
general, countries with an above average increase in health spending experienced an
above average decrease in avoidable mortality. Life expectancy rate is higher in
advanced countries than for people in other countries. The economic conditions,
earnings proportional to costs, environmental health care and clean weather, and in fact
achieving sustainable development are some effective factors on life style among the
people (Naghmeh, Abbas, Rezza 2013).
The impact of life expectancy on economic growth and health care determinant has
been well introduced at the individual level. From a theoretical perspective, there are
multiple views through which life expectancy affects economic growth (Bloom and
David, 2000). Firstly, more advantageous people increment their salaries by being
more beneficial, physically more energetic and rationally more vigorous. A moment
system for enhanced financial improvement is through expanded sparing. As
individuals live more, they will have a tendency to put more in their retirement. For
instance, a 10 year increment in life span is appeared to prompt to a 4.5 percent ascend
in reserve funds (Bloom and David 2004). Mahumud, Rawal, Hossain, and Islam
(2013) examined that GDP Per capita, health expenditure per capita (HEPC), total
health expenditure as a share of GDP and out-of-pocket expenditure on health as a
23
share of private expenditure were statistically significant and positive relationship on
life expectancy.
2.1.5 Infant Mortality
Infant mortality is the number of hildren born alive to the number of live children who
died before reaching one year of age is the infant mortality rate. Also it is largely
responsible for the increase in the remaining children live at birth, decrease in infant‟s
mortality in childhood deaths. A study which analyzed government spending on
health and public health indicators suggested that public health expenditure had an
significant relationship upon health and particularly upon infant mortality (Franco,
2000). A study on state health expenditure and infant mortality rate in India also
showed a same outcome which is significant relationship the variables (Bhalotra,
2007).
According to Farag, Nandakumar, Wallack, Hodgkin (2013), they examined the
relationship between country health expenditure and the determinants of health
expenditure such as infant mortality rate and revealed that health expenditure has a
significant effect on reducing infant mortality rate. In the present study too countries
that had a relatively high percent of government spending on health had better infant
mortality indicators, on the other hand countries which had a high proportion of private
spending on health did not necessarily have a lower infant mortality rate.
Governmental health expenditure on health in terms of per capita was the most
24
important determinant of infant mortality rate (Farag, Nandakumar, Wallack, and
Hodgkin, 2013).
Concerning the health expenditure, accessible confirmation recommends that toward
low levels of expanded public expenditure on health required high impact on mortality
rates compared with private expenditure while at high development levels the contrast
is accurate. According to Anand and Ravallion (1993) examined that expenditure on
health are significantly on the factors of infant and child mortality for developed
countries. In addition the level of per capita income, health and education factors are
positive relationship determinants as well. Tuner (1991) studies stated that infant
mortality is most significant toward health expenditure.
2.1.6 Public expenditure
According to Leu (1986) the public sectors has played an important role in health care
expenditure and stated that there has significant relation between public expenditure
and health expenditure in Malaysia. Besides that, there are few studied found that a
positive relationship occurs between health care expenditure and public expenditure. If
government uses a lot of fund on health care expenditure, it will increase the total
health expenditure. It gives result as the public expenditure in total health spending
have a positive relationship toward total health care expenditure (Leu, 1986).
In the annual budget of the government, some division of costs for public and private
25
expenditures is allocated to health care and medical purposes in the community in
which these costs may cover given health care services which are preventive and
medical, family planning activities, and the activities concerning to nutrition and
emergency aids determined for health purposes (World Bank, 2011).
Nurudeen and Usman, (2010) suggest that government should increase its expenditure
in the expanded of the health sector since it increase productivity and economic growth.
It showed the significant and positive of relation between public expenditure and health
2.2 CONCLUSION
As a conclusion for this chapter regarding the theoretical framework, all the
independent variables have influenced the dependent variable. The independent
variables such as real per capita gross domestic product, proportion of population aged
more than 65 years old, life expectancy, infant mortality, and public expenditure on
health care in total health care expenditure have its own topic to be discussed. As
supported by previous studies, it was assumed that those variables are significant in
determining factor affecting the health expenditure in Malaysia. Therefore this study
will be collects the database for the research methodology and plan carefully. It is to
obtain a proper analysis in proving what previous studies had accurate and correct or
other than that.
26
CHAPTER 3
RESEARCH METHODOLOGY
3.0 INTRODUCTION
Research methodology is systematically method to solve the research problem. It
also can be understood as a science of studying the step how the study is work
scientifically. In order to achieve the objectives at every stage of operational of the
research process, all the studies need to choose the methods to use from a multiplicity
methods, procedures and research methodology models. Therefore, the studies need
to list out many steps that generally adopted in this study in order to find the
determinants of health expenditure in Malaysia with a thing at the behind them.
There are also have the information about the data has been used and what particular
method have used, the reason particular method of analyze data was adopted and a
many of the similar other questions with concerning the research study was find as the
researcher get deeper in the research methodology.
The choices and decisions made in this part of the research take into consideration the
literature review as done in the previous chapter. Literature review tells if others
have used procedures and methods similar to the ones that researcher are proposing,
which procedures and methods have worked well for them, and what problems they
have faced with them. Thus, it allows researcher to better position in selecting a
27
methodology that is capable of providing a valid answer to our research question.
Last but not least, the next sub topic in this chapter will explain the research design,
data collection method, data processing and method of data analysis.
3.1 RESEARCH DESIGN
The aim of this study is to determine the determinant of health expenditure in
Malaysia. In order to carry out the study, it will use research design as the basic
direction. In this study, researcher has to use quantitative research. Quantitative
research includes a collection of numerical data to answer a specific question. It
explained a brief of the information on the characteristic and it also the trend in
tracking. Then, a time series data was used in this study.
Besides, this study found a data of predetermined instrument to outcome statistical
data. In simple words, it is explained more to structure of data collection method.
Moreover, it not just provides sight about summary information on the characteristic
but also provide the important to research in tracking the trend. According to
McDaniel and Gates (2010), there are three types of research design which includes
exploratory research, descriptive research, and causal research. Exploratory research
is useful when the research questions are not clear to show the progress of the
hypothesis. Therefore, this study was also applied to construct a better understanding
on a problem and opportunity. In this study paper expletory research was used to give
28
more clear research questions.
3.2 THEORETICAL FRAMEWORK
Theoretical framework can be determined as a collection of interrelated concepts like
a theory but not necessarily well worked out that guided the studies to determine
what thing that will measure and what statistical relationship that wants to find up.
Regarding to this topic, this study tries to identify the relationship between real per
capita gross domestic product income), proportion of population aged more than
65 years old, life expectancy, infant mortality and public expenditure on health care
in total health care expenditure that could impact health expenditure. The figure
3.2.1 is shown below:
29
Real per capita gross
domestic product (income)
Gerdtham and Johnson
(1992), Parkin (1987), Fogel
(1997), Mleiman (1974),
Newhouse (1977)
Prportion of population aged

more than 65 years old
Zwiefel, Felder, Meiers
(1992), Ruggeri (2002),
Fujino (1987), Matto (2005)
Life expectancy
Nurudeen and Usman
(2010), Naghmeh Abbas,
Rezza (2013), Bloom and
David (2004), Judge (1995) Health Expenditure
Kuan, (2011), Mushkin,
Sadaghi (2010), Okuanade
(2009)
Infant Mortality
Bhalotra (2007), Franco
(2000), Farag, Nandakumar,
Hodgkin (2013), Gupta
(2001)
Public expenditure
Gerdtham and Johnson
(1992), Rao, Jani, Sanjivee
(2008)
INDEPENDENT VARIABLES DEPENDENT VARIABLES
Figure 3.2.1 Theoretical Framework
30
3.3 DATA COLLECTION METHODS
In order to study the determinant of health expenditure in Malaysia, researchers had
attained data on the indicators of real per capita gross domestic product (income),
proportion of population aged more than 65 years old, life expectancy, infant mortality
and public expenditure on health care in total health care expenditure in Malaysia
from the DataStream. At the same time, due to not enough data collected for
particular years from journal sources, the data collection have taken from the other
sources as data was related as it give more information effectively and give more
understanding towards the readers.
For this study, the data refers to the annually time series data where the data was
consists for 30 years occur in Malaysia start from years 1985 to 2015. The data was
includes the real per capita gross domestic product (income), proportion of population
aged more than 65 years old, life expectancy, infant mortality and public expenditure
on health care in total health care expenditure. In addition, most of the journal and
articles that related with the study have taken from data-stream provided by the
university. Therefore, data stream is select as one way to collect the data.
Besides, quantitative research is made since all the data are form in quantitative data.
Quantitative research as define by Cohen (1980) (as cited in Sukamolson, 2005) is the
example for social research where it use the empirical methods and empirical
statement that shows in numerical terms. Other than that, quantitative research also
31
as discuss phenomenon by gather quantitative which analyst using mathematically
based method. Since the data researcher used from DataStream are in numerical
terms, it was qualifies as the quantitative data as mentioned in the statement provide
by Sukamolson (2005).
In the other hand, time series data is the combination of observations on the values a
variable during a period such as daily, monthly, quarterly, and annually (Gujarati &
Porter, 2009). All the data used in this study was come from the secondary data as the
data was already been gathered by someone else for the other purpose. The
secondary data is more economic compare the primary data is the reason this study
was choose the secondary data. It is because secondary data not use cost in order to
get the data since the data can be easily obtained from free online sites such as
DataStream. Another reasons is the researchers also no need t take a long time in
collecting the data by themselves. From that, the study can more focus on the
analysis.
3.4 DATA ANALYSIS
The regression model is a linear model application where the response variable
depending associated with the numerical value of one or more quantitative variables
called factors or independent variables (Freund, 2006). In various forms, is a relatively
easy way to link simple linear regression that allows more than one independent
32
variable (Freund, 2006). The objective regression is just as simple regression, which
wants to use the relationship between a response (dependent) variable and factors
(independent) variables to predict or explain behaviour in response variable (Freund,
2006). The relationship as shown in the formula below:
Yt = β0 + β1X1t + β2X2t + .... βnXnt + Ɛt
Where β0 is a constant in the regression equation, β1, β2 and βn are the regression
coefficients. The error terms do not capture the number of variations predicted by
the slope and intercept terms. They generally have two purposes for regression
analysis. The first is to understand the relationship between variables such as
spending on advertising and sales, the second objective is to predict the value of a
variable based on other values (Render, 2009).
In order to investigate the relationship between dependent variable and independent
variables, there are some of the test that was used such as unit root test, normality test,
autocorrelation test, functional form, heteroscedasticity test and multicollinearity test.
In order to run and test the regression analysis, this study was used Electronic Views
(EViews).
33
3.4.1 E-Views
According to Filip (2011), E-Views can be defined as a statistical software
package for data analysis, regression and forecasting. Other than that, E-views
also know how to estimate cross-sectional and panel data analysis. Furthermore, it
also given a useful data management and econometric analysis tools and produces
high-quality graphical and tabular model output. As mention above, this study
was used e-view in order to run and test the relationship between independent
variables and dependent variables. Besides that, it used diagnostic test whether
they are multicollinearity, autocorrelation, normality, functional form and
heteroscedascity problem is exist or not.
3.4.2 Multiple Linear Regressions
Multiple linear regressions was used to attempt the relationship between two or
more independent variables and the dependent variable and observed data by
installing the linear equation. It also stated by Gujarati and Porter (2009) which is
the multiple linear regressions contains two or more independent variables (Xі)
and one dependent variable (Y). Each of the independent variables associated
with the dependent variable. It is importance to measure the impact of various
influences simultaneously on a single variable. Furthermore, because the left-
sided variables with simple regression, multiple regressions is often essential
34
even if the investigator is interested in the effect of one independent variable. In
this study, the independent variable is measured on a scale that persistent and
dependent variables are continuous. This study‟s equation of multiple linear
regression as below:
Y=β0 + β1LO + β2X2 …. + Ɛ
In this study, researcher were used multiple linear regressions model because of
their estimation result is included many independent variables. Thus, it was used
to make sure the estimated result is not run and would be have a big different from
the actual results. It is because of to ensure the accurate of the estimation of study.
There have four independent variables in this study which are real per capita gross
domestic product (income), proportion of population aged more than 65 years old,
life expectancy, infant mortality and public expenditure. Thus, this study try to
not use two variables only if the two independent variables are more correlated, it
is because to prevent from getting any biased information. The equation model
as below:
HE= α + β1LOGA65 + β2LOGGDP + β3LOGLE + β4LOGIMR + β5LOGPE + Ɛ
35
3.4.3 F-test statistic
Overall significance of the estimated regression is measure by the F-test. It is
statistical test under the null hypothesis that included F-distribution in the test
statistic. If the parameters are included in the model, it will use the F-test. It had
been advisable to data set for the statistical model use the F-test to compare and to
determine the best right the population from the data sampled. Furthermore, in
order to identify a P-value that give a sign how one can get the results by chance
will be help by analyse the data using F-test. Other than that, the observation
getting difference by chances if there is less than 1%,5% and 10%, the study will
reject the null hypothesis and the data was conclude as a significant for the all
model. The test will be conducted to check the success of the regression model.
The regression model is valuable when the Prob(F-statistic) is less than the
significance level (Jonathan, 2013).
3.4.4 T-test statistic
T-test means statistical data analysis step the hypothesis testing which is related
with two independent groups and samples The T-test statistic is employed to test
all the hypotheses statement. As stated by Lucey (2002), T-test is the procedure
for hypothesis with two independent variables or groups. T-test assess whether
the observed differences between two sample means occurred by chance.
36
Furthermore, this test helps to analyse the data in order to determine a P-value
that indicates on how the results of one could get.
In this study, there are three significances level that been used which are:
i. Significance level of (1%)
ii. Significance level of (5%)
iii. Significance level of (10%)
Therefore, if the result is less than 1%, 5%, or 10%, this study will reject the null
hypothesis. This also means that if the P-value of T-test is lower than 0.01, 0.05,
or 0.10, they will reject the null hypothesis. Also, the conclusion is there is
significance between the independent variables and dependent variable. In short,
the significance of each independent variable to dependent variable is test by T-
test statistic.
3.4.5 Diagnostic Checking
As mention above, this study need to conduct several hypotheses testing to
determine and detect whether the model is free from autocorrelation,
multicollinearity and heteroscedasticity problems since the model might has
econometric problems.
37
3.4.5.1 Normality test
Normality test or Jarque Bera test is introduced by Jarque and Bera (1980)
also known as “omnibus” test. This test combines skewness and
kurtosis into a single statistic. In the normality test, JarqueBera Test is
used to test the normality of data that is being used in the research to
know whether if have error term of the variables. Hypothesis
statements of JarqueBera Test for normality test are null hypothesis
which is the distribution of the data is a normal distribution and alternate
hypothesis which is the distribution of the data is not normal distribution.
If the probability is less than the significant level, the data is significant,
reject null hypothesis means the data is not normal distribution.
Ho: the distribution of the data is a normal distribution
H₁ : the distribution of the data is not a normal
distribution
3.4.5.2 Multicollinearity
Toward those beginning, this study have ideas to run some test on the
multicollinearity problem in place to assess if the independent variables in
the model are highly related among each other or not. The study will be
applying covariance analysis to observe whether there is correlation
38
between the independent variables.
Multicollinearity can prompt to a numbers of problems with regression.
In few cases, multicollinearity will cause the regression coefficients to
have a sign opposite that of the actual relationship. Therefore, when
there is a high level of multicollinearity, the study cannot depend on the
individual coefficients to interpret the results. This is because it is
certain that the problem had affect the statistical significant of the
individual regression coefficients and the ability to use them to explain
the relationships. When multicollinearity is present, important variables
can appear to be non-significant and the standard errors can be large than
it is supposed to be (Larget, 2007)
To evaluate multicollinearity, the correlation among the independent
variables should be known. The results are shown both as an individual
Rsquared and a Variance Inflation Factor (VIF). Motulsky (2002) stated
that when the R-squared and VIF values are high for any of the variables;
the model is affected by multicollinearity.
3.4.5.3 Autocorrelation test
As examined by Gujarati and Porter (2009), autocorrection may be
characterized as correlation in the middle of parts of the observation
39
requested in time and place. As in time series data, there might be the
correlation between disturbance terms. Additional time permit reason
that autocorellation will happened is on those ponder omitted exactly
imperative variables from the model or utilized those functional form.
Though autocorellation occurs in the stated model, this study might get
slant effects.
Consequently, those examine necessity will check for autocorellation
problem as it could happen in the examined model if the error is
correlated. Previously, identifying those autocorrelation problems, this
study have selected Breush-Godfrey Serial Correlation LM Test to run the
test. Since research sample size is small which has 31 observation, this
study also include informal way (graphical method) to detect
autocorrelation problem. This will be as a result those sample is small
and graphical method will provide more accurate answer compare to
hypothesis testing, so the final conclusion will be drawn base on graphical
result.
3.4.5.4 Heteroscedasticity
Take after on, the investigation run the heteroscedasticity test should test
for the moment difference of lapse term. The study utilze ARCH test
40
should recognize the heteroscedasticity problem in this model. As found
by Gujarati and Porter (2009), model for heteroscedasticity problem has
error terms that don‟t bring a steady difference. There might be greater
difference when values of some independent variables have tendency on a
chance to be bigger alternately more modest. Hence the model with
heteroscedsticity problem will no longer have minimum variance or be
efficient. This will prompt to the incorrect conclusion.
According to Porter (2009), when the error terms do not have constant
variances or unequal spread or variance that indicates a problem of
Heteroscedasticity. If the probbility is less than 1%, 5%, and 10%, the
level of significant is reject the null hypothesis becouse the result
Heterosedasticity test is significant. Thus, the data can be concluded that
it has Heteroscedasticity problem. In additional, if fail to reject the null
hypothesis it can be concluded that the residual are homoscedasticity
(Gujerati, 2009). However, if the probability is more than 1%, 5%, and
10% level significant it is fail to reject the null hypothesis due to the
results of the Heteroscedasticity test is insignificant. Thus, the data is no
heteroscedasticity problem here it has diagnostic.
41
3.4.5.5 Ramsey’s Reset Test
Ramsey`s Reset test was used to make an analysis whether the model
has no misspecification of functional form or misspecification of
functional form. There are not relevant variables will not biased and
not change if the estimated of error variance is still correct.
Furthermore, there is problem if the estimated variance is larger than
condition, it will be less accurate estimation of the limits. Thus, the
level of confidence intervals will not high than condition. This
Ramsey`s Reset test is aimed to provide a sample standard of evidence
of nonlinearity. To conduct it, one runs the regression and saves the
fitted values of the dependent variables (Christopher Dougherty, 2012)
H0: There is no misspecification of functional form
H1: There is misspecification of functional form
3.4.5.6 Unit Root Test
Unit root test was used in this study in order to check whether the data was
find are stationary or non-stationary. If the result of test is fail to reject
null hypothesis at significant level, the result of test is insignificant. So
that, it can be concluded that the data is non-stationary.
42
According to Philips(1986) stated that by using non-stationary data, the
result from regression data will biased and the hypothesis will not state
the actual phenomena. Unit root test will run for four tests which are
data at level no trend, data at level with trend, 1st difference no trend and
1st difference with trend. Furthermore, there are two unit root test
conducted in the analysis which are:
3.4.5.6.1 Augmented Dickey-Fuller Test (ADF) (1981)
Augmented Dickey-Fuller (ADF) test developed by Dickey and Fuller
(1979) is used to check whether there is a unit root in economic variables.
By checking the presence of stationary of each variable, we would test the
data series in term of levels and first difference. It requires examinations
for stationary before proceeding further to investigate the relationship
between the Ordinary Least Square regression analyses. The null
hypothesis tested that the variables under investigation have a unit root,
which the alternative hypothesis do not have a unit root.
3.4.5.6.2 Philips- Perron Test (PP) (1988)
Philips-Person Test (PP) developed by Peter C.B is also used to check
whether unit root test is in economic variables. Furthermore, it also uses
nonparametric statistical methods to take care of the serial correlation in
43
the error terms without adding lagged difference terms.
One advantage of the PP tests over the ADF tests is that the PP tests are
strengthen to general forms of heteroscedasticity in the error term.
Another advantage is that the user does not require specifying a lag length
for the test regression.
3.4.5.6.3 Kwiatkowski-Phillips-Schmidt-Shin test
Kwiatkowski-Phillips-Schmidt-Shin test developed by Kwiatkowski et.al
(1991) suggest that a test of the null hypothesis that an observable series is
trend stationary. This test aimed to complement unit root tests. One can
distinguish series that appear to be stationary, series that appear to have a
unit root, and series for which data are not sufficiently informative by
testing both the unit root hypothesis and the stationary hypothesis.
44
3.5 VARIABLE
The variables divided into two variables which are independent variables and
dependent variable.
3.5.1 Dependent Variables
The dependent variable for this study is refers to real per capita health expenditure in
Malaysia. This variable is the main object of the study where the findings can identify
whether there is causal effect between independent variables to health expenditure.
3.5.2 Independent Variables
For this study, there are five preferences variables that give impact to health
expenditure in Malaysia. The variables refer to real per capita gross domestic
product (income), proportion of population aged more than 65 years old, life
expectancy, infant mortality and public expenditure on health care in total health care
expenditure. The independent variables influence directly the health expenditure
either in positive or negative way.
45
3.6 CONCLUSION
This chapter explains how to measure the relationship between real per capita gross
domestic products (income), proportion of population aged more than 65 years old,
life expectancy, infant mortality and public expenditure on health care in total health
care expenditure affect health expenditure in Malaysia by using several methods from
1985 until 2015 annually. The Linear Regression Model (LRM) is applied in this study
which is multiple linear regression have been developed in this study. By applying
these regressions, the result obtained in this study and the relationship between these
variables can be measure and examine. After determine both the data and
methodology in this chapter, the analysis on the data will be run in Chapter 4.
46
CHAPTER 4
FINDINGS AND DATA ANALYSIS
4.0 INTRODUCTION
In chapter 4 will explain the analysis of data that had been collected for the study
determinants of health expenditure in Malaysia. By using multiple linear
regression model method, this study analyze the data to examine the significantly
relationship of several independent variables and a dependent variables. In
addition, the result of relationship between dependent variables which is health
expenditure and independent variables; gross domestic product (GDP),
proportion population of age 65 above (A65), life expectancy (LE), infant mortality
rate, (IMR) and public expenditure (PE) had be determined. Thus from this
section, data analysis would be completed to fulfill the objectives and hypothesis
which was mentioned in chapter1. All data gathered has been analyzed using E-
Views.
47
4.1 DIAGNOSTIC CHECKING OF MULTIPLE LINEAR REGRESSION MODEL
Table 4.1.1: Summary of Diagnostic Checking of Multiple Linear Regression
HYPOTHESIS TESTING P-VALUE

Jarque-Bera Normality Test 0.07390
Ramsey‟s RESET Test
a. T-statistic 0.0543
b. F-statistic 0.0543
c. Likelihood 0.0271
Multicollinearity Test
3.1 Correlation between Independent Variables
Independent Variables Corelation
A. Age 65 above Gross domestic product -0.112216
B. Gross domestic product Infant mortality rate 0.114963
C. Infant mortality rate Life expectancy -0.992274
D. Life expectency Public expenditure 0.862230
E. Public expenditure Age 65 above 0.884415
F. Age 65 above Infant mortality rate -0.874238
G. Gross domestic product Life expectency -0.093835
H. Life expectency Age 65 above 0.891687
I. Gross domestic product Public expenditure -0.156092
J. Public expenditure Infant mortality rate -0.870624
Heteroscedasticity
a. White Test 0.5734
Durbin Watson Test 1.621713
48
To find out whether the error terms of the model are normally distributed, Jarque-Bera
Normality Test was used. Given the p-valued of 0.07390 is more than 0.05. Thus, it
is estimated fail to reject the null hypothesis, which means the data is normal and
follow normal distribution.
Next, Ramseey‟s RESET Test was utilized to examine whether the model is have
misspesification or not. The results of this test showed T-statistic, F-statistic, and
Likelihood Ratio is 0.0543, 0.0543, and 0.271 respectively which is higher than the
significant level of 0.01. Thus it shows the evidence fail to reject null hypothesis,
means there is specified of functional form used on the model. Therefore the model
could be bias because the sample size was small with 31 observations only and the data
should becautiously interpreted.
Multicollinearity can be defined where two or more independent variables in multiple
regression models are strongly correlated with each other, meaning that one can be
linearly predict the data from the other data with highly degree of accuracy. In order to
determine whether there are multicollinearity problem between independent variables,
this study was running multicollinearity model test. Multicollinearity problem exist if
there is correlation coefficient higher than 0.90. However, the result shows that there
is no multicollinearity problem exists between variables.
Even though Jarque-Bera Normality Test proved that the error terms are are normally
distributed, it does means that the model free from heteroscedasity and autocorrelation
49
problems. The Autoregressive Conditional Heteroscedasity test (White Test) has been
tested on model to determine whether the model has heteroscedasity problem or free
from it. Heteroscedasity happens when the variance of the error terms contrast across
observation. Heteroscedasticity test indicates the result of white test evidence fail to
reject null hypothesis. It means that the model estimated has no heteroscedasticity
problem. The White test not present in the residual of an estimated model. The
White test are present in the residual of estimated model.
Lastly, to check autocorrelation problem, the Durbin Watson statistic has been tested.
The Durbin Watson statistic is a number that test for autocorrelation in the residuals
from a statistical regression analysis. Durbin Watson result in between 0 to 4. The
values around 2 indicate that there is no autocorrelation problem in the sample. Values
approaching 0 indicate positive autocorrallation and values toward 4 indicate negative
autocorralation. The result for Durbin Watson test is 1.621713 near to 2 which means
that the sample has no autocorrelation problem. In conclusion, the error term of
multiple linear regressions model are normally distributed, the models are specified of
functional form, has no multicollinearity problem exist between variables, has no
autocorrelation and free from heteroscedasity problem. The standard blunders, T-
statistic values, F-statistic value and P-value of independent variables and entire
estimated are correct.
50
4.2 UNIT ROOT TEST
4.2. 1 AUGMENTED DICKEY FULLER (AFD)
LEVEL 1st DIFFERENCE

Variable No Trend Trend No Trend Trend
HE -3.28999 -2.534274 -5.367133
(0.0248)** (0.3107)** -7.072499 (0.0009)***
(0.0000)***
GDP -3.679510 -3.828814(0 -7.022822
(0.0098)*** .0288)** -7.386366 (0.0000)***
(0.0000)***
A65 2.021259 -1056881 -1.549842 -3.586273
(0.9998) (0.9193) (0.4947)* (0.0488)**
IMR -1.975310 -2.833925 -1.81395 -3.277823
(0.2952)* (0.1974) (0.3665) (0.0914)*
LE 1.630840 -1.333201 -1.119272 4.300144

(0.9992) (0.8554) (0.6931) (1.0000)
PE -1.468661 -3.914496 -6.994177 -6.875929
(0.5354) (0.0238)** (0.0000)*** (0.0000)***
Notes: *** P significant at 1% level , ** P significant at the 5% level, * P significant at the 10% level
51
The table 4.2.1 indicates the outcomes of Augmented Dickey Fuller Test for all variables at
level and 1st difference. It showed that the data for real per capita gross domestic product
(income), proportion of population age 65 above, life expectancy, infant mortality, public
expenditure are stationary at level and 1st difference. The finding is supported by
statistically significant of ADF test for all variables data at 1st difference and level.
Subsequently this provide evidence to reject the null hypothesis, therefore it is inferred that
GDP, A65, LE, IMR, and PE on health care total expenditure are stationary.
4.2.2 PHILLIPS-PERRON (PP)

-3.072576 -2.462540 -6.568691 -7.784346
HE
(0.0396)** (0.3428) (0.0000)*** (0.0000)***
-3.679510 -3.818709 -7.556020 -7.446974
GDP
(0.0098)*** (0.0294)** (0.0000)*** (0.0000)***
4.349964 -0.733990(0.9 -1.319366 -3.585687
A65
(1.0000) 609) (0.6068) (0.0488)**
IMR -2.346356 -0.881570 -1.786188 -1.900227
(0.1649) (0.9452) (0.3795) (0.6286)
-6.046976 -2.250291 -1.678604 2.908006
LE
(0.0000)*** (0.4465) (0.4311) (1.0000)
-.1224727 -3.928847 -7.627849 -8.180322
PE
(0.6504) (0.0231)** (0.0000)*** (0.0000)***
52
The table 4.2.2 examined the results of Phillips-Perron Test for all variables at level and 1st
difference. It is showed that the data for real per capita gross domestic product (income),
proportion of population aged more than 65 years old, life expectancy, infant mortality,
public expenditure are stationary at level and 1st different. The findings are supported by
statistically significant of PP test for all variable data at 1st difference and level. Thus this
give evidence to reject the null hypothesis, therefore it is concluded that the data for real
GDP, A65, LE, IMR and PE on health care in total care expenditure are stationary.
4.2.3 KWIATKOWSKI-PHILLIPS-SCHMIDT-SHIN (KPSS)

HE 0.686812 0.170560 0.361473 0.082166
(0.739000) (0.21600) (0.73900) (0.21600)
GDP 0.117193 0.079644 0.211411 0.143675
(0.73900) (0.21600) (0.73900) (0.21600)
A65 0.678363 0.198110 0.663553 0.68955
(0.73900) (0.21600) (0.73900) (0.21600)
IMR 0.710714 0.166312 0.358695 0.073407
(0.73900) (0.21600) (0.73900) (0.21600)
LE 0.726049 0.193593 0.576745 0.135403

(0.73900) (0.21600) (0.73900) (0.21600)
PE 0.684559 0.088388 0.035136 0.32136
(0.73900) (0.21600) (0.73900) (0.21600)
53
The table 4.2.3 shows the result of Kwiatkowski-Phillips Schmidt-Shin Test for all
variables at level and 1st difference. Kwiatkwski-Phillips Schmidt-Shin test is contrast with
the above two test where it significant when the p-value is more than 0.10. KPSS does not
provide a p-value and the result only showing test statistic value and critical values (Piotr
and Katarzyna, 2007). This study compares the test statistic value with the critical value on
desired significance level which is at 10%. We reject the null hypothesis if the test
statistic is higher than the critical value and fail to reject the null hypothesis when test
statistic is lower than critical value. It is showed that the data for health expenditure, gross
domestic product, proportion of population age 65 above, life expectancy, infant mortality
rate, and public expenditure are stationary at level and 1st difference. This finding is
supported by statistically significant of KPSS test for all variables data at level and 1st
difference. Thus this give evidence fail to reject the null hypothesis, therefore it is
concluded that the data for health expenditure, gross domestic product, proportion of
population age 65 above, life expectancy, infant mortality rate and public expenditure are
stationary using all the three test of unit root test.
54
4.3 DESCRIPTIVE STATISTICS
Table 4.3.1: Descriptive Statistics for year 1986 to 2015

LOGHE LOGGDP LOGA65 LOGIMR LOGLE LOGPE
Mean 1.079151 2.604040 1.436325 2.249702 4.284303 0.602563
Median 1.111858 2.649715 1.378010 2.163323 4.288650 0.526502
Maximum 1.460938 2.910174 1.773426 2.923162 4.316688 0.859509
Minimum 0.343590 1.814825 1.4283985 1.791759 4.24134 0.402126
Std. Dev. 0.315683 0.302764 0.156020 0.35809 0.022176 0.159901
Skewness -0.924911 -1.261297 0.701337 0.406774 -0.393878 0.317556
Kurtosis 2.899280 3.645705 2.148444 1.733378 1.960015 1.547412
Jarque-Bera 4.432978 8.758034 3.477999 2.927162 2.198580 3.246448

Probability 0.108991 0.012538 0.175696 0.231406 0.333107 0.917262
Sum 33.45367 80.72523 44.52608 69.74078 132.8134 18.67945

SumSq. Dev. 2.989664 2.749984 0.730272 3.846931 0.014753 0.767050
Observations 31 31 31 31 31 31
Table 4.3.1 display the descriptive statistics of health expenditure, gross domestic
product, proportion of population age 65 above, life expectancy, infant mortality rate
and public expenditure from 1985 - 2015. The number of observation is 31.
The skewness value of proportion of population age 65 above, infant mortality rate and
public expenditure shows that the return is 0.70, 0.41, and 0.32 in positive value which
mean the distribution of the data are positively skewed which may indicate positive
direction of cure frequency for mode, median and mean. While for health expenditure,
gross domestic product, life expectancy skewness values are -0.95, -1.26, and -0.39
55
respectively, which indicate negative values of skewnes. This mean the distribution of
the data is negatively skewed. This may indicate negative direction of curve
frequency for mode, median and mean.
This kutosis value for health expenditure, gross domestic product, proportion of
population age 65 above, infant mortality rate, life expectancy and public expenditure
are 2.899280, 3.645705, 2.148444, 1.733378, 1.960015 and 1.547412 respectively.
The kurtosis value for gross domestic product only is more than 3 which indicate a
leptokurtic distribution with a sharper peak and fatter tails compared to health
expenditure, proportion of population age 65 above, infant mortality rate, life
expectancy and public expenditure indicate kurtosis value that is less than 3 that is
platykurtic distribution, a distribution with less peaked in the mean, and thinner tails
compared to normal distributions.
The Jarque-Bera values, health expenditure, gross domestic product, proportion of
population age 65 above, infant mortality rate, life expectancy and public expenditure
indicate the value of p 0.108991, 0.012538, 0.175696, 0.231406, 0.333107, 0.917262
respectively. The result of Jarque-Bera test shows evidence fail to reject null for
proportion of population age 65 above, infant mortality rate and public expenditure. It
means that the residual of empirical model estimated i normally distributed.
Meanwhile, health expenditure, gross domestic product, life expectancy shows
evidence reject null hypothesis. Therefore, the results estimated from the model can
only be used to represent the sample period not the whole population.
56
4.4 INTERPETATION OF MULTIPLE LINEAR REGRESSION RESULT
4.4.1 INTERPRETATION OF MODEL
LogHE = α + β1LogA65 + β2LogGDP + β3LogIMR + β4LogLE +
β5LogPE + Ɛ
= -100.0557 -1.091493 + 0.106233 + 0.426343 + 23.59383 +
0.636797
p-Value = (0.0000)*** (0.0000)*** (0.0012)*** (0.0601)** (0.0000)***
(0.0001)***
SE = (15.87889) (0.151465) (0.029151) (0.216480) (3.617958)
(0.133774)
n= 31 R2=0.981508 Adj R2=0.977809 Prob(F-Statistic)=(0.0000)
Notes: *** P significant at 1% level, ** P significant at the 5% level, * P significant at the 10% level
Based on the E-View result, all of the independent showed the significant
relationship with the dependent variables. The independent variables like
proportion age 65 above, gross domestic product, life expectancy, public
expenditure are seen to be significant at significant level of 1% as their p value is
57
less than of 0.01 while independent variable such infant mortality rate, are found to
be significant at significant level of 5% because their p value is more than 0.05.
Firstly, proportion age 65 above is significant and it has negative relationship
between health expenditure (HE). The result shows that the proportion age 65
above has negative effect on the health expenditure (HE) due to negative
coefficient (-1.091493). This result is supported Matteo (2005) which examines
the determinants of real per capita health expenditures to assess the impact of age
distribution, income and time. The variables used are believed have effects on
health expenditure. The positive relations of health expenditure that includes per
capita income, the proportion of the population either over the age 65 or under the
age 15, the public share of healthcare spending, urbanization, the amount of foreign
aid and the number of physicians per capita. The result suggests that an ageing
population was significant on health expenditures, but the effects are negatively
correlation (Matteo, 2005).
Secondly, gross domestic product (GDP) is significant and it has positive
relationship between health expenditure (HE). The result shows that the gross
domestic product has positive relationship on the health expenditure (HE) due to
positive coefficient 0.106233. This result is supported by Newhouse (1977) which
examined 13 OECD countries and found that income is the most important factor in
the difference in health care expenditure among countries. In addition, Culyer
(1990) studied individual OECD countries using pooled data and found a
58
significantly positive correlation between health care expenditure and GDP.
Thirdly, infant mortality rate is significant and indicates that there is positive
relationship between health expenditure (HE). The result shows that the infant
mortality rate has positive effect on the health expenditure due to the positive
coefficient (0.426343). According to Farag, Nandakumar, Wallack, Hodgkin
(2013), they examined the relationship between country health expenditure and the
determinants of health expenditure such as infant mortality rate and revealed that
health expenditure has a significant and positive effect on reducing infant mortality
rate.
Next, life expectancy is significant and it has positive relationship between health
expenditure (HE). The result shows that the life expectancy has positive
relationship on the health expenditure due to the positive coefficient (23.59383)
Mahumud, Rawal, Hossain, and Islam (2013) examined that GDP Per capita, health
expenditure per capita (HEPC), total health expenditure as a share of GDP and out-
of-pocket expenditure on health as a share of private expenditure were statistically
significant and positive relationship on life expectancy. Bayati, (2013) also found
that health expenditures have a most significant and positive impact on life
expectancy and a significant negative impact on mortality rate.
Next, public expenditure also significant and it indicates that there is positive
relationship between health expenditure (HE). The result shows that the public
59
expenditure has positive coefficient (0.636797). This results supported by Leu
(1986) which examined the public sectors have roles an important role in health
care expenditure. Besides that, there are few studied found that a positive
relationship occurs between health care expenditure and public expenditure. If
government uses a lot of capital on health care expenditure, it will increase the total
health expenditure. It gives result that the public expenditure in total health
spending have a positive relationship toward health care expenditure (Leu, 1986).
Lastly, proportion age 65 above and life expectancy are the variable that contribute
the most to the increase of health expenditure in Malaysia. The results shows that
the proportion age 65 above and life expectancy are the most highly significant
with 0.0000 probability values. This finding is supported Ruggeri, J (2002) which
examined that the most significant factor influencing healthcare spending is the
percentage of old people. The old people spend more on medical care than the
young, and it is, therefore intuitively correct to assume that the aggregate health
care increase with higher percentage of elderly population in the country. Plus, for
the life expectancy there are very important factor of economic development of a
country is its people‟s state of health. The majority of studies analyzed panel data
for developed countries, such as Lichternberg, (2000) Crémieux (2005) and Bayati
(2013) found that health expenditure have a most significant and positive impact on
life expectancy and mortality rate.
Overall, the model is most significant with 0.0000 probability value. The R-
squared which is quite high shows 98.1508 % of the variation in health
60
expenditure can be clarified by the total variation in gross domestic product,
proportion of population age 65 above, infant mortality rate, life expectancy and
public expenditure considering the sample size in the number of independent
variable. Table 4.4.1 shows the understanding of the interpretation of the
significant independent variables evaluated coefficient values.
61
TABLE 4.4.1 : INTERPRETATION OF THE SIGNIFICANT β OF MODEL
B INTERPRETATION
C = -100.0557 The value of 100.0557 is the intercept of the line,
indicating the average level of Malaysia HE inflows is
10 005.57% when the level of independent variables
such as GDP, A65, LE, IMR, and PE are zero. However,
this intercept value is not meaningful and can be ignored.
LOGA65 = -1.091493 If proportion of population age 65 above predicted to
increase by 1%, health expenditure will decrease by
19.1493%, holding the value other variable constant.
LOGGDP = 0.106233 If gross domestic product predicted to increase by 1%,
health expenditure will increase by 10.6233%, holding
other variables constant
LOGIMR = 0.426343 If infant mortality rate predicted to increase by 1%,
health expenditure will increase by 42.6343%, holding
other variables constant.
LOGLE = 23.59383 If life expectancy predicted to increase by 1%, health
expenditure will increase by 2359.383%, holding other
variables constant.
LOGPE = 0.636797 If public expenditure is predicted to increase by 1%,
health expenditure will increased by 63.6797%, holding
the value other variables constant.
62
4.5 CONCLUSION
The study need to performed diagnostic tests which is to find out if the data of this
study is normally distributed by run the Jarque-Bera test. This study also has done
Ramsey test and Multicollinearity test to determine whether the model is
misspecification and has multicollinearity problem. The result for Ramseey test
shows that the model is no multicollinearity problem in model. Lastly the test result
for determine the heteroscedasticity by using White test shows that the model free
from haterosdascticity problem and autocorrelation test result shows that the data has
no autocorrelation problem by run the Durbin Watson test. After all off the data have
been tested in E-views the result shows that the multiple linear regression model of
this study are normally distributed, the model are specified of functional form, has no
multicollinearity problem exists between variables, free heterosdasticity problem and
has no autocorrelation.
Lastly, the data of the study will be determine whether the data is stationary or not
referring to the ADF, PP and KPS unit root test. Then the result shows that the
independent variables gross domestic product, proportion of population age 65 above,
infant mortality rate, life expectancy and public expenditure are stationary at level and
1st difference. Overall, the multiple linear regression models in this study are
significant.
63
CHAPTER 5
CONCLUSION AND RECOMMENDATION
5.0 INTRODUCTION
The main objective of this study is to investigate the effect of macroeconomic
indicators such as income (GDP), proportion of population aged more than 65 years old
(A65), life expectancy (LE), infant mortality (IM) and public expenditure (PE) on the
health expenditure in Malaysia. In chapter five, this study will included the empirical
result from the previous chapter and detail from will be explained accordingly. This
study had run diagnostic checking test, F-test, and T-test to examine the significance of
the dependent variable (HE) and independent variables (GDP, A65, LE, IM, PE) in the
previous chapter. Therefore, the major findings of the variables of this study will be
discussed by comparing the findings with the past studies based on the result that the
study gathered in chapter 4. Lastly, the implication of this study will be discussed and
recommendation for future studies also will be provided.
5.1 SUMMARY OF STATISTICAL ANALYSIS
The multiple linear regression model results of this study from previous chapter are
achieved the objectives and solve the research question. From previous study, the
64
study started with the F-test to examine whether the multiple linear regression model of
the study is significant or not. After the model has been tested and proving to be
significant, diagnostic checking test was performed, including Jarque-Bera normality
test to find out whether the model are normally distributed, Ramsey‟s RESET test to
check if the model is correctly specifid, multicollinearity test to see if there is
multicollinearity problem between the variables, then Autoregressive Conditional
Heteroscedasticity (WhiteTest) including white test to examine whether
heteroscedasticity problem exist or not, and lastly, Durbin Watson test was perform to
find out whether autocorrelation problem do exist in this model or not.
Based on the statistical results in chapter 4, the multiple linear regressions show that
there were no problems of autocorrelation and free from heteroscedasticity. Last but
not least, the results show that the dependent variable (HE) is significant to health
expenditure in Malaysia at 0.1 significances level, other independent variables such as
income (GDP), proportion of population aged more than 65 years old (A65), life
expectancy (LE), and public expenditure (PE) is significant at 0.01 significance level
while infant mortality (IM) are significant to health expenditure in Malaysia at 0.05
significant level.
65
HYPOTHESES OF THE STUDY DECISION
1 H0: There is no significant relationship between per capita Reject H0
gross domestic product (GDP) and the changes in the
Malaysia health expenditure (HE).
H1: There is significant relationship between per capita
gross domestic product (GDP) and the changes in the
Malaysia health expenditure (HE).
2 H0: There is no significant relationship between proportion Reject H0
of population aged more than 65 years old (A65) and the
changes in the Malaysia health expenditure (HE).
H2: There is significant relationship between proportion of
population aged more than 65 years old (A65) and the
changes in the Malaysia health expenditure (HE).
3 H0: There is no significant relationship between life Reject H0
expectancy (LE) and the changes in the Malaysia health
expenditure (LE).
H3: There is significant relationship between life
expectancy (LE) and the changes in the Malaysia health
expenditure (LE).
4 H0: There is no significant relationship between infant Reject H0
mortality (IM) and the changes in the Malaysia health
expenditure (HE).
H4: There is significant relationship between infant
66
mortality (IM) and the changes in the Malaysia health
expenditure (HE).
5 H0: There is no significant relationship between public Reject H0
expenditure (PE) and the changes in the Malaysia health
expenditure (PE).
H5: There is significant relationship between public
expenditure (PE) and the changes in the Malaysia health
expenditure (PE).
6 H0: The Malaysia Health Expenditure (HE) has no Reject H0
relationship with the dependent variables namely Gross
Domestic Product (GDP), Proportion of population aged
more than 65 years old (A65), Life Expectancy (LE), Infant
Mortality (IM), and Public Expenditure (PE).
H6: The Malaysia Health Expenditure (HE) has
relationship with the dependent variables namely Gross
Domestic Product (GDP), Proportion of population aged
more than 65 years old (A65), Life Expectancy (LE), Infant
Mortality (IM), and Public Expenditure (PE).
67
5.2 DISCUSSION OF MAJOR FINDINGS
5.2.1 GROSS DOMESTIC PRODUCT (GDP)
As the result of the findings of Multiple Linear Regression, the first objective has been
proven that gross domestic product (GDP) has a correlation with the health expenditure
in Malaysia. Gross domestic product (GDP) is significant and it has negative
relationship between health expenditure (HE). The result shows that the gross
domestic product has positive relationship on the health expenditure (HE) due to
positive coefficient 0.106233. It is well known that there is a significant relationship
between national expenditures on healthcare and gross domestic product (GDP). Many
studies find that there is a strong and positive correlation between these two variables
(Sulku and Caner, 2009).
5.2.2 PROPORTION OF POPULATION AGED MORE THAN 65 YEARS
OLD
The second objective has been proven that proportion of population age more than 65
years old (A65) has correlation with the health expenditure (HE) in Malaysia.
Population age more than 65 years old (A65) is significant and it has negative
relationship between health expenditure (HE). The result shows that the proportion
age 65 above has negative effect on the health expenditure (HE) due to negative
68
coefficient (-1.091493). The previous empirical result examine that just two
independent variables which are gross domestic product and proportion of population
age 65 above have significant relationship with health care spending in most of the
developed countries. These two variables are positively correlated with the amount of
health care expenditure. The point is, when the income and ageing population of
countries larger, the amount of health expenditure increase (Furuoka, Yee, Kok, Hoque,
and Munir, 2011).
5.2.3 LIFE EXPECTANCY
The third objective has been proven that life expectancy (LE) has correlation
relationship with health expenditure (HE) in Malaysia. Life expectancy (LE) is
significant and it has positive relationship between health expenditure (HE). The
result shows that the life expectancy has positive relationship on the health expenditure
due to the positive coefficient (23.5938). Mahumud, Rawal, Hossain, and Islam (2013)
examined that GDP Per capita, health expenditure per capita (HEPC), total health
expenditure as a share of GDP and out-of-pocket expenditure on health as a share of
private expenditure were statistically significant and positive relationship on life
expectancy.
69
5.2.4 INFANT MORTALITY
The fourth objective has been proven that infant mortality (IM) has correlation
relationship with the health expenditure (HE) in Malaysia. Infant Mortality rate (IMR)
is significant and the positive relationship between health expenditure (HE). The
result shows that the infant mortality rate (IMR) has positive effect on the health
expenditure due to the positive coefficient (0.426343). According to Farag,
Nandakumar, Wallack, Hodgkin (2013), they examined the relationship between
country health expenditure and the determinants of health expenditure such as infant
mortality rate and revealed that health expenditure has a significant and positive effect
on reducing infant mortality rate.
5.2.5 PUBLIC EXPENDITURE
The fifth objective has been proven that public expenditure (PE) has correlation
relationship with the health expenditure (HE) in Malaysia which means public
expenditure also significant and it indicates that there is positive relationship
between health expenditure (HE). The result shows that the public expenditure
has positive coefficient (0.636797). This results supported by Leu (1986) which
examined the public sectors have assumed an important role in health care services.
On the one hand, there are some studies found that a positive relationship exists
between health care expenditure and public expenditure. When the government
70
spends more money or the share of public expenditure on total amount of health
care expenditure is higher, there is increase expenditure on health care. It means
that there would be a positive relationship between health care expenditure and the
share of public expenditure in total health expenditure (Leu, 1986).
5.3 IMPLICATION OF THE STUDY
This study of determinant of health expenditure based on macroeconomic indicators
including GDP, A65, LE, IMR and PE in Malaysia will give impacts for the policy
makers, federal government, investors and also relevant researchers. Besides,
investment activities on health become one of an attractive investment especially for
the investors either local or foreign. As the value of health expenditure are increasing
over the years. This study found that the selected variables such as gross domestic
product (GDP), proportion of population aged 65 above (A65), life expectancy (LE),
infant mortality rate (IMR) and public expenditure (PE) are significantly affected
health expenditure (HE) in Malaysia. In this study, the investors can have better
understanding and can predict the future development before made an investment.
Furthermore, this study will contributes to Ministry of Health as it give them picture
of what are significantly affecting health expenditure in Malaysia. This study have
include some other important factor like real per capita gross domestic product,
proportion of population aged more than 65 years old, and life expectancy. This
71
study results can serve as a guideline or reference Ministry of health where can
improved patient flow, timely referrals and appropriate management of pregnant
women and high-risk children with complications, as well as a more friendly, and
client oriented service.
In the previous chapter, result shows that the entire variables are significantly affected
the health expenditure in Malaysia which the policy maker and government may take
any actions based on these variables in the study to determine the latest variables that
are most significant relationship with health expenditure by imposing new policy or
amend the existing policy in other to control the value of health expenditure in
Malaysia.
5.4 RECOMMENDATION
As stated by finding results and conclusion of the result, there are few
recommendations that can be given to improve and enhance understanding about the
determinants of macroeconomic indicators on health expenditure in Malaysia.
Firstly, for the future research, the other study advised to use additional variables to
know the impact of variables and it relationship towards health expenditure. Instead
of just focusing on macroeconomic variables, the study can use other type of
variables besides macroeconomic variables. For example, the researcher can use
data such as unemployment rate, the demand and supply, cost of production, private
72
expenditure. This is because health expenditure can be affected by various factors
as it integrated with economic growth. Thus, these variables could give the best
result which determinant is significant with health expenditure.
Secondly, researchers must obtain an accurate data for accurate result. It is
advisable for the future researchers to run data cleaning process to increase the
dependability and accuracy of data. Therefore, the result would not be bias and thus,
reduce the uncertainty. The steps of improving data quality can encourage data
quality. Data quality is important to obtain the accurate data to improve the quality
of research study.
Thirdly, it is highly recommended that next study to increase the sample size to more
than 31 observations. In this study, researcher is using 31 observations only and
annually dataset. The other study can use monthly, quarterly or semiannual data
instead of using annual data. This is because the bigger the sample of sizes of data,
the lower the probability of having multicollinearity, heteroscedasticity and
autocorrelation problems.
Last but not least, future study may conduct a study on other countries such as Asian
countries, Europe countries and African countries. From the background of this
research on other countries, it can provide more information for the readers regarding
the factor that determined the changing of health expenditure in other countries.
Hence, it helps the people that have interest in economic to make a comparison and
73
decision on health expenditure in Malaysia and several of countries.
5.5 CONCLUSION
On the first part of the study, it has explained the background of this study especially
on the health expenditure in Malaysia. In the background of the study, several term
that involved in the study such as gross domestic product, proportion of population
aged more than 65 years old, life expectancy, infant mortality and public expenditure
in Malaysia has been explained and several of proof from previous study that suggest
that there are the existence of significant relationship between gross domestic product,
proportion of population aged more than 65 years old, life expectancy, infant
mortality and public expenditure to health expenditure in Malaysia.
After that, six research objective and research question has been extract based on the
study which is to investigate the significant relationship between gross domestic
product, proportion of population aged more than 65 years old, life expectancy, infant
mortality and public expenditure with health expenditure in Malaysia and to be
determine the variables that contribute the most impact to the increase of health
expenditure in Malaysia. This study was expected to be useful for policymakers,
government, researchers, investor and others.
On the other hand, the study used Multiple Linear Regression Model in order to
74
achieve the entire objective of the study. In this study, the annually data of gross
domestic product, proportion of population aged more than 65 years old, life
expectancy, infant mortality, public expenditure and health expenditure in Malaysia
were used. The data from 1985 to 2015 is collected. Based on the developing
model, the result form Multiple Linear Regression model, there are positive
relationship between independent variables such as gross domestic product (GDP),
life expectancy (LE), infant mortality rate (IMR), public expenditure (PE) and health
expenditure in Malaysia. If the ratio in GDP, LE, IMR, and PE increase, it will
increase the ratio of health expenditure in Malaysia. Meanwhile, the result also shows
that there are negative relationships between infant mortality (IMR) and health
expenditure in Malaysia. If the ratio in infant mortality rate decrease, it will increase
the ratio of health expenditure in Malaysia.
The results of this study can be a guideline and provide knowledge about indicator of
health expenditure in Malaysia such as policymaker and government. It is also
provide information about volatilities of health expenditure in Malaysia for investor
to do investment decision in health industry in Malaysia.
In conclusion, this paper proved that all independent variables such as gross domestic
product (GDP), proportion of population aged more than 65 years old (A65), life
expectancy (LE), infant mortality (IMR), and public expenditure (PE) are significant
in determining macroeconomic indicator on health expenditure in Malaysia.
Based on the model and findings from this study, the variable that contributes the
75
most are proportion of population age 65 (A65) and life expectancy (LE). This study
also has discussed some implication and recommendation in order to contribute to
future researchers.
76
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APPENDIX
Descriptive Statistic

Mean 1.079151 2.604040 1.436325 2.249702 4.284303 0.602563
Median 1.111858 2.649715 1.378010 2.163323 4.288650 0.526502
Maximum 1.460938 2.910174 1.773426 2.923162 4.316688 0.859509
Minimum 0.343590 1.814825 1.283985 1.791759 4.241341 0.402126
Std. Dev. 0.315683 0.302764 0.156020 0.358094 0.022176 0.159901
Skewness -0.924911 -1.261297 0.701337 0.406774 -0.393878 0.317556
Kurtosis 2.899280 3.645705 2.148444 1.733378 1.960015 1.547412
Jarque-Bera 4.432978 8.758034 3.477999 2.927162 2.198580 3.246448

Probability 0.108991 0.012538 0.175696 0.231406 0.333107 0.197262
Sum 33.45367 80.72523 44.52608 69.74078 132.8134 18.67945

Sum Sq. Dev. 2.989664 2.749984 0.730272 3.846931 0.014753 0.767050
Observations 31 31 31 31 31 31
Multiple Linear Regression and Durbin Watson
Dependent Variable: LOGHE

Method: Least Squares
Date: 12/19/16 Time: 11:34
Sample: 1985 2015
Included observations: 31
Variable Coefficient Std. Error t-Statistic Prob.
C -100.0557 15.87889 -6.301178 0.0000

LOGA65 -1.091493 0.151465 -7.206249 0.0000
LOGGDP 0.106233 0.029151 3.644246 0.0012
LOGIMR 0.426343 0.216480 1.969436 0.0601
LOGLE 23.59383 3.617958 6.521310 0.0000
LOGPE 0.636797 0.133774 4.760248 0.0001
R-squared 0.981508 Mean dependent var 1.079151

Adjusted R-squared 0.977809 S.D. dependent var 0.315683
S.E. of regression 0.047026 Akaike info criterion -3.104247
Sum squared resid 0.055286 Schwarz criterion -2.826701
Log likelihood 54.11583 Hannan-Quinn criter. -3.013774
F-statistic 265.3812 Durbin-Watson stat 1.621713
Prob(F-statistic) 0.000000
Normality Test
12
Series: Residuals
Sample 1985 2015
10
Observations 31
8 Mean 1.04e-14
Median 0.002533
6 Maximum 0.136925
Minimum -0.068710
Std. Dev. 0.042929
4
Skewness 0.940788
Kurtosis 5.014565
2
Jarque-Bera 9.815120
0 Probability 0.007390
-0.05 0.00 0.05 0.10 0.15
Breusch-Godfrey Serial Correlation LM Test:
F-statistic 3.020402 Prob. F(5,20) 0.0344

Obs*R-squared 13.33719 Prob. Chi-Square(5) 0.0204
Test Equation:
Dependent Variable: RESID
Date: 12/19/16 Time: 11:37
Sample: 1985 2015
Presample missing value lagged residuals set to zero.
C -24.99227 15.44909 -1.617718 0.1214

LOGA65 -0.122672 0.134156 -0.914402 0.3714
LOGGDP -0.018523 0.026688 -0.694072 0.4956
LOGIMR 0.298621 0.204069 1.463332 0.1589
LOGLE 5.734809 3.525381 1.626720 0.1194
LOGPE -0.042139 0.115784 -0.363946 0.7197
RESID(-1) -0.064364 0.205384 -0.313382 0.7572
RESID(-2) 0.317704 0.187603 1.693493 0.1059
RESID(-3) -0.010467 0.201040 -0.052064 0.9590
RESID(-4) -0.486426 0.197852 -2.458534 0.0232
RESID(-5) -0.491640 0.218717 -2.247842 0.0360
R-squared 0.430232 Mean dependent var 1.04E-14

White Test
Heteroskedasticity Test: White
F-statistic 0.753186 Prob. F(16,14) 0.7092

Obs*R-squared 14.34036 Prob. Chi-Square(16) 0.5734
Scaled explained SS 18.72083 Prob. Chi-Square(16) 0.2834
Test Equation:
Dependent Variable: RESID^2
Date: 12/19/16 Time: 11:38
Sample: 1985 2015
Collinear test regressors dropped from specification
C -1.933164 2.771621 -0.697485 0.4969

LOGA65^2 -0.141545 0.347753 -0.407028 0.6901
LOGA65*LOGGDP 0.058872 0.100743 0.584372 0.5683
LOGA65*LOGIMR -0.357599 0.631516 -0.566255 0.5802
LOGA65*LOGLE -2.083957 3.301421 -0.631230 0.5381
LOGA65*LOGPE -0.004330 0.429318 -0.010085 0.9921
LOGA65 10.02855 15.65145 0.640742 0.5320
LOGGDP^2 -0.004769 0.020439 -0.233315 0.8189
LOGGDP*LOGIMR -0.023418 0.020459 -1.144655 0.2715
LOGGDP*LOGLE 0.007250 0.034580 0.209671 0.8369
LOGGDP*LOGPE -0.066567 0.080870 -0.823135 0.4242
LOGIMR^2 -0.114472 0.084172 -1.359966 0.1953
LOGIMR*LOGLE 0.236538 0.255953 0.924145 0.3711
LOGIMR*LOGPE 0.031073 0.356650 0.087124 0.9318
LOGLE*LOGPE 1.908241 7.869585 0.242483 0.8119
LOGPE^2 0.033334 0.108298 0.307799 0.7628
LOGPE -8.128354 34.12098 -0.238222 0.8152

Adjusted R-squared -0.151588 S.D. dependent var 0.003632
Ramsey RESET Test
Ramsey RESET Test

Equation: UNTITLED
Specification: LOGHE C LOGA65 LOGGDP LOGIMR LOGLE LOGPE
Omitted Variables: Squares of fitted values
Value df Probability
t-statistic 2.023448 24 0.0543
F-statistic 4.094342 (1, 24) 0.0543
Likelihood ratio 4.882946 1 0.0271
F-test summary:
Sum of Sq. df Mean Squares
Test SSR 0.008057 1 0.008057
Restricted SSR 0.055286 25 0.002211
Unrestricted SSR 0.047229 24 0.001968
LR test summary:
Value df
Restricted LogL 54.11583 25
Unrestricted LogL 56.55730 24
Unrestricted Test Equation:

Date: 12/19/16 Time: 11:38
Sample: 1985 2015
C -157.6194 32.15084 -4.902499 0.0001

LOGA65 -1.534478 0.261425 -5.869662 0.0000
LOGGDP 0.149093 0.034711 4.295289 0.0002
LOGIMR 0.658565 0.234250 2.811377 0.0097
LOGLE 37.06496 7.481337 4.954323 0.0000
LOGPE 1.214680 0.312231 3.890327 0.0007
FITTED^2 -0.394415 0.194922 -2.023448 0.0543

Multicolinearity Test between DV and IV

LOGHE 1.000000 0.012151 0.789452 -0.958457 0.965059 0.837692
LOGGDP 0.012151 1.000000 -0.112216 0.114963 -0.093835 -0.156092
LOGA65 0.789452 -0.112216 1.000000 -0.874238 0.891687 0.884415
LOGIMR -0.958457 0.114963 -0.874238 1.000000 -0.992274 -0.870624
LOGLE 0.965059 -0.093835 0.891687 -0.992274 1.000000 0.862320
LOGPE 0.837692 -0.156092 0.884415 -0.870624 0.862320 1.000000
Multicolinearity Test between IV
LOGA65 LOGGDP LOGIMR LOGLE LOGPE

LOGA65 1.000000 -0.112216 -0.874238 0.891687 0.884415
LOGGDP -0.112216 1.000000 0.114963 -0.093835 -0.156092
LOGIMR -0.874238 0.114963 1.000000 -0.992274 -0.870624
LOGLE 0.891687 -0.093835 -0.992274 1.000000 0.862320
LOGPE 0.884415 -0.156092 -0.870624 0.862320 1.000000
Unit Root Test
Augmented Dickey-Fuller HE (Level, No Trend)
Null Hypothesis: LOGHE has a unit root

Exogenous: Constant
Lag Length: 1 (Automatic - based on SIC, maxlag=7)
t-Statistic Prob.*
Augmented Dickey-Fuller test statistic -3.289994 0.0248

Test critical values: 1% level -3.679322
5% level -2.967767
10% level -2.622989
*MacKinnon (1996) one-sided p-values.
Augmented Dickey-Fuller Test Equation

Dependent Variable: D(LOGHE)
Date: 12/19/16 Time: 11:49
Sample (adjusted): 1987 2015
Included observations: 29 after adjustments
LOGHE(-1) -0.146581 0.044554 -3.289994 0.0029

D(LOGHE(-1)) -0.339823 0.162724 -2.088340 0.0467
C 0.210242 0.051602 4.074316 0.0004

Augmented Dickey-Fuller HE (Level, With Trend)

Exogenous: Constant, Linear Trend
t-Statistic Prob.*

5% level -3.568379
10% level -3.218382

Date: 12/19/16 Time: 11:50
LOGHE(-1) -0.279012 0.110095 -2.534274 0.0174

C 0.229917 0.066337 3.465879 0.0018
@TREND("1985") 0.006766 0.003913 1.729123 0.0952

Augmented Dickey-Fuller HE (1st Dif, No Trend)
Null Hypothesis: D(LOGHE) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.971853
10% level -2.625121

Dependent Variable: D(LOGHE,2)
Date: 12/19/16 Time: 11:51
D(LOGHE(-1)) -1.361051 0.295522 -4.605591 0.0001

D(LOGHE(-1),2) 0.102955 0.187571 0.548885 0.5880
C 0.046397 0.018090 2.564799 0.0167
R-squared 0.648728 Mean dependent var -0.004919

Augmented Dickey-Fuller HE (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.580623
10% level -3.225334

Date: 12/19/16 Time: 11:52
D(LOGHE(-1)) -1.709529 0.318518 -5.367133 0.0000

D(LOGHE(-1),2) 0.275723 0.191994 1.436097 0.1639
C 0.128066 0.041069 3.118284 0.0047
@TREND("1985") -0.004156 0.001906 -2.180982 0.0392

Phillips-Perron HE (Level,No Trend)

Exogenous: Constant
Bandwidth: 3 (Newey-West automatic) using Bartlett kernel
Adj. t-Stat Prob.*
Phillips-Perron test statistic -3.072576 0.0396

5% level -2.963972
10% level -2.621007
Residual variance (no correction) 0.004754

HAC corrected variance (Bartlett kernel) 0.002185
Phillips-Perron Test Equation

Date: 12/19/16 Time: 11:52
LOGHE(-1) -0.102287 0.042358 -2.414830 0.0225

C 0.146326 0.047013 3.112443 0.0042

Phillips-Perron He (Level,With Trend)

Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382


Date: 12/19/16 Time: 11:53
LOGHE(-1) -0.279012 0.110095 -2.534274 0.0174

C 0.229917 0.066337 3.465879 0.0018
@TREND("1985") 0.006766 0.003913 1.729123 0.0952

Phillips-Perron HE (1st Dif, No Trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 11:54
D(LOGHE(-1)) -1.240713 0.186751 -6.643683 0.0000

C 0.046565 0.015999 2.910414 0.0071

Phillips-Perron HE (1st Dif, With Trend)

Adj. t-Stat Prob.*

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 11:54
D(LOGHE(-1)) -1.357895 0.182345 -7.446862 0.0000

C 0.110552 0.032499 3.401698 0.0022
@TREND("1985") -0.003725 0.001680 -2.217493 0.0355

Augmented Dickey-Fuller GDP (Level, No Trend)
Null Hypothesis: LOGGDP has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.963972
10% level -2.621007

Dependent Variable: D(LOGGDP)
Date: 12/19/16 Time: 11:55
LOGGDP(-1) -0.567809 0.154316 -3.679510 0.0010

C 1.499188 0.404632 3.705062 0.0009

S.E. of regression 0.255893 Akaike info criterion 0.176223
Sum squared resid 1.833469 Schwarz criterion 0.269636
Log likelihood -0.643341 Hannan-Quinn criter. 0.206106
Augmented Dickey-Fuller GDP (Level, With Trend)

t-Statistic Prob.*

5% level -3.568379
10% level -3.218382

Date: 12/19/16 Time: 11:56
LOGGDP(-1) -0.588791 0.153779 -3.828814 0.0007

C 1.657329 0.420540 3.940955 0.0005
@TREND("1985") -0.006677 0.005379 -1.241340 0.2252

Log likelihood 0.189192 Hannan-Quinn criter. 0.232213
Augmented Dickey-Fuller GDP (1st Dif, No Trend)
Null Hypothesis: D(LOGGDP) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.967767
10% level -2.622989

Dependent Variable: D(LOGGDP,2)
Date: 12/19/16 Time: 11:57
D(LOGGDP(-1)) -1.288769 0.182145 -7.075499 0.0000

C 0.018404 0.055852 0.329521 0.7443

Augmented Dickey-Fuller GDP (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.574244
10% level -3.221728

Date: 12/19/16 Time: 11:58
D(LOGGDP(-1)) -1.302182 0.185422 -7.022822 0.0000

C 0.087269 0.122684 0.711332 0.4832
@TREND("1985") -0.004284 0.006776 -0.632318 0.5327

Phillips-Perron GDP (Level, No Trend)
Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.963972
10% level -2.621007


Date: 12/19/16 Time: 11:59
LOGGDP(-1) -0.567809 0.154316 -3.679510 0.0010

C 1.499188 0.404632 3.705062 0.0009

Phillips-Perron GDP (Level, With Trend)
Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382


Date: 12/19/16 Time: 11:59
LOGGDP(-1) -0.588791 0.153779 -3.828814 0.0007

C 1.657329 0.420540 3.940955 0.0005
@TREND("1985") -0.006677 0.005379 -1.241340 0.2252

Log likelihood 0.189192 Hannan-Quinn criter. 0.232213
Phillips-Perron GDP (1st, No Trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 12:00
D(LOGGDP(-1)) -1.288769 0.182145 -7.075499 0.0000

C 0.018404 0.055852 0.329521 0.7443

Phillips-Perron GDP (1st, With Trend)

Adj. t-Stat Prob.*

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 12:01
D(LOGGDP(-1)) -1.302182 0.185422 -7.022822 0.0000

C 0.087269 0.122684 0.711332 0.4832
@TREND("1985") -0.004284 0.006776 -0.632318 0.5327

Augmented Dickey-Fuller A65 (Level, No Trend)
Null Hypothesis: LOGA65 has a unit root
Exogenous: Constant
t-Statistic Prob.*
Augmented Dickey-Fuller test statistic 2.021259 0.9998

5% level -2.967767
10% level -2.622989

Dependent Variable: D(LOGA65)
Date: 12/19/16 Time: 12:03
LOGA65(-1) 0.034113 0.016877 2.021259 0.0537

D(LOGA65(-1)) 0.524372 0.182929 2.866535 0.0081
C -0.040213 0.022038 -1.824713 0.0796

Augmented Dickey-Fuller A65 (Level, With Trend)

t-Statistic Prob.*

5% level -3.574244
10% level -3.221728

Date: 12/19/16 Time: 12:03
LOGA65(-1) -0.033229 0.031440 -1.056881 0.3007

D(LOGA65(-1)) 0.342751 0.182971 1.873255 0.0728
C 0.035725 0.036883 0.968600 0.3420
@TREND("1985") 0.001446 0.000588 2.459054 0.0212

Augmented Dickey-Fuller A65 (1st Dif, No Trend)
Null Hypothesis: D(LOGA65) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.967767
10% level -2.622989

Dependent Variable: D(LOGA65,2)
Date: 12/19/16 Time: 12:03
D(LOGA65(-1)) -0.184637 0.119133 -1.549842 0.1328

C 0.004091 0.002413 1.695722 0.1014

Augmented Dickey-Fuller A65 (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.574244
10% level -3.221728

Date: 12/19/16 Time: 12:04
D(LOGA65(-1)) -0.657657 0.183382 -3.586273 0.0014

C -0.003117 0.003117 -1.000050 0.3265
@TREND("1985") 0.000904 0.000289 3.124827 0.0043

Phillips-Perron A65 (Level, No Trend)
Exogenous: Constant
Adj. t-Stat Prob.*
Phillips-Perron test statistic 4.349964 1.0000

5% level -2.963972
10% level -2.621007
Residual variance (no correction) 7.44E-05


Date: 12/19/16 Time: 12:04
LOGA65(-1) 0.073388 0.011405 6.434530 0.0000

C -0.088490 0.016335 -5.417177 0.0000

Phillips-Perron A65 (Level, With Trend)

Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382

HAC corrected variance (Bartlett kernel) 7.04E-05

Date: 12/19/16 Time: 12:05
LOGA65(-1) -0.021308 0.030251 -0.704381 0.4872

C 0.020842 0.035900 0.580550 0.5664
@TREND("1985") 0.001653 0.000500 3.308665 0.0027

Phillips-Perron A65 (1st Dif, No Trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 12:05
D(LOGA65(-1)) -0.184637 0.119133 -1.549842 0.1328

C 0.004091 0.002413 1.695722 0.1014

Phillips-Perron A65 (1st Dif, With Trend)

Adj. t-Stat Prob.*

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 12:05
D(LOGA65(-1)) -0.657657 0.183382 -3.586273 0.0014

C -0.003117 0.003117 -1.000050 0.3265
@TREND("1985") 0.000904 0.000289 3.124827 0.0043

Augmented Dickey-Fuller IMR (Level, No Trend)
Null Hypothesis: LOGIMR has a unit root
Exogenous: Constant
t-Statistic Prob.*

5% level -2.976263
10% level -2.627420

Dependent Variable: D(LOGIMR)
Date: 12/19/16 Time: 12:07
LOGIMR(-1) -0.012099 0.006125 -1.975310 0.0609

D(LOGIMR(-1)) 1.046495 0.187234 5.589220 0.0000
D(LOGIMR(-2)) 0.085974 0.285437 0.301200 0.7661
D(LOGIMR(-3)) -0.432819 0.180565 -2.397025 0.0255
C 0.015737 0.011995 1.311983 0.2031

Augmented Dickey-Fuller IMR (Level, With Trend)

t-Statistic Prob.*

5% level -3.574244
10% level -3.221728

Date: 12/19/16 Time: 12:07
LOGIMR(-1) -0.062130 0.021924 -2.833925 0.0090

D(LOGIMR(-1)) 0.932905 0.096260 9.691531 0.0000
C 0.176522 0.064559 2.734278 0.0113
@TREND("1985") -0.002424 0.000916 -2.645365 0.0139

Augmented Dickey-Fuller IMR (1st Dif, No Trend)
Null Hypothesis: D(LOGIMR) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.971853
10% level -2.625121

Dependent Variable: D(LOGIMR,2)
Date: 12/19/16 Time: 12:08
D(LOGIMR(-1)) -0.141323 0.077924 -1.813595 0.0818

D(LOGIMR(-1),2) 0.435167 0.174916 2.487857 0.0199
C -0.004977 0.003364 -1.479538 0.1515

Augmented Dickey-Fuller IMR (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.587527
10% level -3.229230

Date: 12/19/16 Time: 12:08
D(LOGIMR(-1)) -0.333349 0.101698 -3.277823 0.0034

D(LOGIMR(-1),2) 0.394237 0.170679 2.309819 0.0307
D(LOGIMR(-2),2) 0.477815 0.188718 2.531897 0.0190
C -0.020906 0.007837 -2.667532 0.0141
@TREND("1985") 0.000515 0.000267 1.925532 0.0672

Philips-Perron IMR (Level, No trend)
Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.963972
10% level -2.621007


Date: 12/19/16 Time: 12:09
LOGIMR(-1) -0.036589 0.009321 -3.925299 0.0005

C 0.045160 0.021360 2.114218 0.0435

Philips-Perron IMR (Level, With trend)

Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382


Date: 12/19/16 Time: 12:09
LOGIMR(-1) -0.010384 0.043395 -0.239298 0.8127

C -0.030917 0.124856 -0.247621 0.8063
@TREND("1985") 0.001079 0.001744 0.618648 0.5413

Philips-Perron IMR (1st Dif, No trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 12:10
D(LOGIMR(-1)) -0.114917 0.081093 -1.417092 0.1679

C -0.003382 0.003541 -0.955170 0.3480

Philips-Perron IMR (1st Dif, With trend)

Adj. t-Stat Prob.*

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 12:10
D(LOGIMR(-1)) -0.134153 0.105168 -1.275601 0.2134

C -0.005398 0.007728 -0.698566 0.4910
@TREND("1985") 8.05E-05 0.000273 0.294928 0.7704

Augmented Dickey-Fuller LE (Level, No ternd)
Null Hypothesis: LOGLE has a unit root
Exogenous: Constant
t-Statistic Prob.*

5% level -2.971853
10% level -2.625121

Dependent Variable: D(LOGLE)
Date: 12/19/16 Time: 12:11
LOGLE(-1) 0.009019 0.005530 1.630840 0.1160

D(LOGLE(-1)) 2.184119 0.368880 5.920950 0.0000
D(LOGLE(-2)) -1.002377 0.394140 -2.543201 0.0178
C -0.039064 0.024033 -1.625439 0.1171

Sum squared resid 6.73E-07 Schwarz criterion -14.23005
Augmented Dickey-Fuller LE (Level, With Trend)

t-Statistic Prob.*

5% level -3.603202
10% level -3.238054

Date: 12/19/16 Time: 12:12
LOGLE(-1) -0.022313 0.016736 -1.333201 0.2001

D(LOGLE(-1)) 2.665193 1.114708 2.390934 0.0286
D(LOGLE(-2)) 1.757617 1.883873 0.932980 0.3639
D(LOGLE(-3)) -5.100920 1.825853 -2.793718 0.0125
D(LOGLE(-4)) 0.048385 2.118568 0.022839 0.9820
D(LOGLE(-5)) 3.358050 1.506902 2.228446 0.0396
C 0.087221 0.071651 1.217302 0.2401
@TREND("1985") 0.000226 4.97E-05 4.539033 0.0003

Augmented Dickey-Fuller LE (1st Dif, No Trend)
Null Hypothesis: D(LOGLE) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.976263
10% level -2.627420

Dependent Variable: D(LOGLE,2)
Date: 12/19/16 Time: 12:12
D(LOGLE(-1)) -0.055775 0.049832 -1.119272 0.2746

D(LOGLE(-1),2) -0.387661 0.910968 -0.425548 0.6744
D(LOGLE(-2),2) 1.825679 0.906482 2.014025 0.0558
C 0.000214 0.000122 1.748733 0.0937
R-squared 0.494011 Mean dependent var -2.26E-05

Augmented Dickey-Fuller LE (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.603202
10% level -3.238054

Date: 12/19/16 Time: 12:13
D(LOGLE(-1)) 1.898977 0.441608 4.300144 0.0004

D(LOGLE(-1),2) 0.435316 0.886171 0.491232 0.6292
D(LOGLE(-2),2) 1.776494 1.132172 1.569103 0.1340
D(LOGLE(-3),2) -3.783802 1.253095 -3.019565 0.0074
D(LOGLE(-4),2) -3.714430 1.514691 -2.452270 0.0246
C -0.008272 0.001913 -4.322801 0.0004
@TREND("1985") 0.000190 4.26E-05 4.450781 0.0003

Philips-Perron LE (Level, No Trend)
Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.963972
10% level -2.621007


Date: 12/19/16 Time: 12:14
LOGLE(-1) -0.030732 0.003130 -9.818546 0.0000

C 0.134142 0.013407 10.00576 0.0000

Philips-Perron LE (Level, With Trend)

Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382


Date: 12/19/16 Time: 12:14
LOGLE(-1) -0.064791 0.019885 -3.258222 0.0030

C 0.278708 0.084422 3.301360 0.0027
@TREND("1985") 8.50E-05 4.90E-05 1.732926 0.0945

Philips-Perron LE (1st Dif, No Trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 12:15
D(LOGLE(-1)) -0.085997 0.050895 -1.689686 0.1026

C 0.000185 0.000133 1.395921 0.1741

Philips-Perron LE (1st Dif, With Trend)

Adj. t-Stat Prob.*
Phillips-Perron test statistic 2.908006 1.0000

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 12:15
D(LOGLE(-1)) 0.390101 0.106264 3.671042 0.0011

C -0.001737 0.000413 -4.206527 0.0003
@TREND("1985") 4.58E-05 9.56E-06 4.793640 0.0001

Augmented Dickey-Fuller PE (Level, No Trend)
Null Hypothesis: LOGPE has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.963972
10% level -2.621007

Dependent Variable: D(LOGPE)
Date: 12/19/16 Time: 12:16
LOGPE(-1) -0.153307 0.104386 -1.468661 0.1531

C 0.105694 0.064124 1.648278 0.1105

Augmented Dickey-Fuller PE (Level, With Trend)

t-Statistic Prob.*

5% level -3.568379
10% level -3.218382

Date: 12/19/16 Time: 12:16
LOGPE(-1) -0.720109 0.183960 -3.914496 0.0006

C 0.264926 0.070616 3.751634 0.0009
@TREND("1985") 0.011475 0.003269 3.509671 0.0016

Augmented Dickey-Fuller PE (1st Dif, No Trend)
Null Hypothesis: D(LOGPE) has a unit root

Exogenous: Constant
t-Statistic Prob.*

5% level -2.967767
10% level -2.622989

Dependent Variable: D(LOGPE,2)
Date: 12/19/16 Time: 12:17
D(LOGPE(-1)) -1.288172 0.184178 -6.994177 0.0000

C 0.018165 0.016740 1.085121 0.2875

Augmented Dickey-Fuller PE (1st Dif, With Trend)

t-Statistic Prob.*

5% level -3.574244
10% level -3.221728

Date: 12/19/16 Time: 12:17
D(LOGPE(-1)) -1.289633 0.187558 -6.875929 0.0000

C 0.010216 0.036320 0.281285 0.7807
@TREND("1985") 0.000498 0.002010 0.247823 0.8062

Philips-Perron Pe (Level, No Trend)
Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.963972
10% level -2.621007


Date: 12/19/16 Time: 12:18
LOGPE(-1) -0.153307 0.104386 -1.468661 0.1531

C 0.105694 0.064124 1.648278 0.1105

Philips-Perron Pe (Level, With Trend)

Adj. t-Stat Prob.*

5% level -3.568379
10% level -3.218382


Date: 12/19/16 Time: 12:18
LOGPE(-1) -0.720109 0.183960 -3.914496 0.0006

C 0.264926 0.070616 3.751634 0.0009
@TREND("1985") 0.011475 0.003269 3.509671 0.0016

Philips-Perron Pe (1st Dif, No Trend)

Exogenous: Constant
Adj. t-Stat Prob.*

5% level -2.967767
10% level -2.622989


Date: 12/19/16 Time: 12:19
D(LOGPE(-1)) -1.288172 0.184178 -6.994177 0.0000

C 0.018165 0.016740 1.085121 0.2875

Philips-Perron Pe (1st Dif, With Trend)

Adj. t-Stat Prob.*

5% level -3.574244
10% level -3.221728


Date: 12/19/16 Time: 12:19
D(LOGPE(-1)) -1.289633 0.187558 -6.875929 0.0000

C 0.010216 0.036320 0.281285 0.7807
@TREND("1985") 0.000498 0.002010 0.247823 0.8062

Kwiatkowski-Phillips-Schmidt-Shin HE (Level, No Trend)
Null Hypothesis: LOGHE is stationary
Exogenous: Constant
LM-Stat.
Kwiatkowski-Phillips-Schmidt-Shin test statistic 0.686812

Asymptotic critical values*: 1% level 0.739000
5% level 0.463000
10% level 0.347000
*Kwiatkowski-Phillips-Schmidt-Shin (1992, Table 1)

KPSS Test Equation

Date: 12/19/16 Time: 12:28
Sample: 1985 2015
C 1.079151 0.056698 19.03323 0.0000

Durbin-Watson stat 0.071562
Kwiatkowski-Phillips-Schmidt-Shin HE (Level, With Trend)
Null Hypothesis: LOGHE is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Date: 12/19/16 Time: 12:31
Sample: 1985 2015
C 0.594842 0.041410 14.36484 0.0000

@TREND("1985") 0.032287 0.002371 13.61697 0.0000

Kwiatkowski-Phillips-Schmidt-Shin HE (1st Dif, No Trend)
Null Hypothesis: D(LOGHE) is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation Dependent

Variable: D(LOGHE) Method:
Least Squares
Date: 12/19/16 Time: 12:32
C 0.037245 0.014074 2.646348 0.0130

Kwiatkowski-Phillips-Schmidt-Shin HE (1st Dif, With Trend)
Null Hypothesis: D(LOGHE) is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation Dependent

Variable: D(LOGHE) Method:
Least Squares
Date: 12/19/16 Time: 12:32
C 0.075062 0.028215 2.660408 0.0128

@TREND("1985") -0.002440 0.001589 -1.535165 0.1360

Kwiatkowski-Phillips-Schmidt-Shin GDP (Level, No Trend)
Null Hypothesis: LOGGDP is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: LOGGDP
Date: 12/19/16 Time: 12:33
Sample: 1985 2015
C 2.604040 0.054378 47.88770 0.0000

Kwiatkowski-Phillips-Schmidt-Shin GDP (Level, With Trend)
Null Hypothesis: LOGGDP is stationary
LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: LOGGDP
Date: 12/19/16 Time: 12:34
Sample: 1985 2015
C 2.657757 0.107365 24.75433 0.0000

@TREND("1985") -0.003581 0.006148 -0.582515 0.5647

Kwiatkowski-Phillips-Schmidt-Shin GDP (1st Dif, No Trend)
Null Hypothesis: D(LOGGDP) is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Date: 12/19/16 Time: 12:34
C 0.020296 0.055915 0.362991 0.7192

Kwiatkowski-Phillips-Schmidt-Shin GDP (1st Dif, With Trend)
Null Hypothesis: D(LOGGDP) is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Date: 12/19/16 Time: 12:34
C 0.088704 0.115772 0.766198 0.4500

@TREND("1985") -0.004413 0.006521 -0.676769 0.5041

Kwiatkowski-Phillips-Schmidt-Shin IMR (Level, No Trend)
Null Hypothesis: LOGIMR is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: LOGIMR
Date: 12/19/16 Time: 12:35
Sample: 1985 2015
C 2.249702 0.064316 34.97916 0.0000

Kwiatkowski-Phillips-Schmidt-Shin IMR (Level, With Trend)
Null Hypothesis: LOGIMR is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: LOGIMR
Date: 12/19/16 Time: 12:36
Sample: 1985 2015
C 2.825922 0.028178 100.2875 0.0000

@TREND("1985") -0.038415 0.001613 -23.80858 0.0000

Kwiatkowski-Phillips-Schmidt-Shin IMR (1st Dif, No Trend)
Null Hypothesis: D(LOGIMR) is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Date: 12/19/16 Time: 12:36
C -0.037713 0.003967 -9.506532 0.0000

Kwiatkowski-Phillips-Schmidt-Shin IMR (1st Dif, With Trend)
Null Hypothesis: D(LOGIMR) is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Date: 12/19/16 Time: 12:37
C -0.060751 0.006611 -9.189321 0.0000

@TREND("1985") 0.001486 0.000372 3.991254 0.0004

Kwiatkowski-Phillips-Schmidt-Shin LE (Level, No Trend)
Null Hypothesis: LOGLE is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: LOGLE
Date: 12/19/16 Time: 12:37
Sample: 1985 2015
C 4.284303 0.003983 1075.688 0.0000

Kwiatkowski-Phillips-Schmidt-Shin LE (Level,With Trend)
Null Hypothesis: LOGLE is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: LOGLE
Date: 12/19/16 Time: 12:38
Sample: 1985 2015
C 4.248132 0.001187 3578.141 0.0000

@TREND("1985") 0.002411 6.80E-05 35.47075 0.0000

Kwiatkowski-Phillips-Schmidt-Shin LE (1st Dif, No Trend)
Null Hypothesis: D(LOGLE) is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Date: 12/19/16 Time: 12:38
C 0.002512 0.000138 18.15007 0.0000

Kwiatkowski-Phillips-Schmidt-Shin LE (1st Dif, With Trend)
Null Hypothesis: D(LOGLE) is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Date: 12/19/16 Time: 12:39
C 0.003642 0.000153 23.73714 0.0000

@TREND("1985") -7.29E-05 8.64E-06 -8.439559 0.0000

Kwiatkowski-Phillips-Schmidt-Shin PE (Level, No Trend)
Null Hypothesis: LOGPE is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: LOGPE
Date: 12/19/16 Time: 12:40
Sample: 1985 2015
C 0.602563 0.028719 20.98128 0.0000

Kwiatkowski-Phillips-Schmidt-Shin PE (Level, With Trend)
Null Hypothesis: LOGPE is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: LOGPE
Date: 12/19/16 Time: 12:40
Sample: 1985 2015
C 0.368421 0.026275 14.02197 0.0000

@TREND("1985") 0.015609 0.001504 10.37531 0.0000

Kwiatkowski-Phillips-Schmidt-Shin PE (1st, No Trend)
Null Hypothesis: D(LOGPE) is stationary

Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Date: 12/19/16 Time: 12:41
C 0.014518 0.016375 0.886624 0.3826

Kwiatkowski-Phillips-Schmidt-Shin PE (1st, With Trend)
Null Hypothesis: D(LOGPE) is stationary

LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Date: 12/19/16 Time: 12:41
C 0.010811 0.034171 0.316381 0.7541

@TREND("1985") 0.000239 0.001925 0.124260 0.9020

Null Hypothesis: A65 is stationary
Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: A65
Date: 01/05/17 Time: 11:07
Sample: 1985 2015
C 4.256742 0.125490 33.92085 0.0000

Null Hypothesis: A65 is stationary
LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: A65
Date: 01/05/17 Time: 11:10
Sample: 1985 2015
C 3.180540 0.089277 35.62543 0.0000

@TREND("1985") 0.071747 0.005112 14.03497 0.0000

Null Hypothesis: D(A65) is stationary
Exogenous: Constant
LM-Stat.

5% level 0.463000
10% level 0.347000

KPSS Test Equation

Dependent Variable: D(A65)
Date: 01/05/17 Time: 11:12
C 0.075200 0.012636 5.951439 0.0000

Null Hypothesis: D(A65) is stationary
LM-Stat.

5% level 0.146000
10% level 0.119000

KPSS Test Equation

Dependent Variable: D(A65)
Date: 01/05/17 Time: 11:14
C -0.033034 0.012116 -2.726411 0.0109

@TREND("1985") 0.006983 0.000683 10.23123 0.0000

ANUALY TIME SERIES DATA FROM 1985-2015
YEAR HE GDP A65 LE IMR PE

1985 1.41 7.24 3.635 69.501 18.6 1.495
1986 1.45 9.51 3.639 69.767 17.5 1.545
1987 1.72 13.75 3.633 70.025 16.6 1.6
1988 1.777 18.3 3.623 70.276 15.7 1.501
1989 1.87 17.42 3.614 70.52 15 1.553
1990 2.21 17.37 3.611 70.757 14.3 1.599
1991 2.52 17.91 3.635 70.989 13.6 1.6292
1992 2.45 17.25 3.662 71.214 13 1.63
1993 2.77 18.25 3.687 71.435 12.4 1.511
1994 2.62 17.57 3.708 71.651 11.9 1.594
1995 2.96 18.19 3.723 71.863 11.5 1.674
1996 2.93 18.36 3.744 72.073 11.1 1.693
1997 2.72 15.68 3.755 72.279 10.7 1.503
1998 2.93 15.72 3.768 72.482 10.1 1.623
1999 3.03 6.14 3.795 72.679 9.4 1.682
2000 3.04 8.86 3.967 72.868 8.7 1.694
2001 3.4 8.88 4.067 73.043 8.1 1.99
2002 3.4 13.75 4.176 73.204 7.6 1.959
2003 3.95 14.15 4.287 73.349 7.3 2.362
2004 3.74 15.14 4.392 73.481 7.1 2.118
2005 3.29 13.69 4.492 73.601 7 1.691
2006 3.65 13.94 4.598 73.711 6.9 2.012
2007 3.61 14.66 4.685 73.818 6.9 1.962
2008 3.47 13.19 4.764 73.926 6.9 1.937
2009 3.97 6.85 4.847 74.038 6.9 2.337
2010 3.99 15.79 4.985 74.158 6.8 2.286
2011 3.89 13.65 5.134 74.287 6.7 2.136
2012 4.01 13.83 5.308 74.423 6.6 2.215
2013 4.02 13.07 5.46 74.568 6.4 2.203
2014 4.17 14.35 5.674 74.718 6.2 2.3
2015 4.31 13.31 5.891 74.94 6 2.311

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THE DETERMINANTS OF HEALTH EXPENDITURE IN MALAYSIA

MOHD FAIZ BIN JUFREE

BACHELOR OF BUSINESS ADMINISTRATION

MOHD FAIZ BIN JUFREE

Submitted in Partial Fulfilment of the

Requirement for the

Bachelor of Business Administration with Honors (Finance)

FACULTY OF BUSINESS MANAGEMENT

UNIVERSITY TECHNOLOGY MARA

BACHELOR OF BUSINESS ADMINISTRATION WITH

HONOURS (FINANCE) FACULTY OF BUSINESS MANAGEMENT

UNIVERSITI TEKNOLOGI MARA

“DECLARATION OF ORIGINAL WORK”

I, Mohd Faiz B Jufree, 93062114622.

Hereby, declare that:

information have been specifically acknowledged.

DR. HALIMAHTON BINTI BORHAN

Bachelor of Business Administration (Hons) Finance

Faculty of Business Management

Universiti Teknologi MARA

SUBMISSION OF PROJECT PAPER

Attached is the project paper titled THE DETERMINANTS OF HEALTH EXPENDITURE IN

MALAYSIA to fulfill the requirement as needed by the Faculty of Business Management,

Universiti Teknologi MARA.

MOHD FAIZ B JUFREE

DECLARATION OF ORIGIN WORK ii

LETTER OF SUBMISSION iii

LIST OF FIGURES vii

LIST OF TABLES vii

LIST OF ABREVIATION viii

1.1 Background of Study 2-5

1.2 Problem Statement 5-9

1.3 Research Question 9-10

1.4 Research Objective 10-11

1.5 Hypothesis of study 11-12

1.6 Limitation of study 13

1.7 Significant of study 14-15

2.1 Review of the literature 17

2.1.1 Health Expenditure 17-18

2.1.2 Real per capita gross domestic product 19-20

2.1.3 Proportion of population age 65 above 20-22

2.1.4 Life expectancy 22-24

2.1.5 Infant mortality rate 24-25

2.1.6 Public Expenditure 25-26

CHAPTER 3 RESEARCH METHODOLOGY

3.0 Introduction 27-28

3.1 Research Design 28-29

3.2 Theoretical Framework 29-30

3.3 Data Collection Method 31-32

3.4 Data Analysis 32-44

4.1 Diagnostic Checking of Multiple Linear Regression 48-50

4.2 Unit root test 51-54

4.3 Descriptive Statistic 55-56

4.4 Interpretation of multiple linear result 57-62

CHAPTER 5 CONCLUSION AND RECOMMENDATION

5.1 Summary of statistical analysis 64-67

5.2 Discussion Major Finding 68-71

5.3 Implication of Study 71-72

5.4 Recommendation 72-74

5.5 Conclusion 74-76

Figure 3.2.1 Diagram of theoretical framework 22

Table 4.1.1 Summary of diagnostic checking Multiple Linear Regression 33

Table 4.2.1 Augmented Dickey Fuller 36