Yi Liu

Date of Award

January 2013

Document Type


Degree Name

Master of Science (MS)


Economics & Finance

First Advisor

David T. Flynn


A major question in determining health policy is to what extent the additional health care expenditure yields benefits in the form of improved health outcomes. However, establishing relationships between them is very complex, because there are numerous factors besides health expenditure that could contribute to health outcomes, and some data especially individual level nutrition and exercise data, are nearly impossible to gather. Another difficulty involves which indicator we should choose to measure health outcomes.

This study examines life expectancy, all-cause age adjusted mortality rates and infant mortality as the "output" of the health care system, and health expenditure, various life-style, education and sociological factors as "inputs". Econometric analyses are conducted on a state level panel data set for the 12 mid-west states in the United States over an eleven-year period from 1999 to 2009. A set of state-level socioeconomic, demographic and lifestyle variables is also examined to determine their effect on health outcomes.

The empirical results indicate that increases in health care expenditure are associated with statistical significantly large improvements in infant mortality and all-cause age adjusted mortality, but appears have no significant effects on life expectancy. The findings are generally consistent with those of several previous studies. First stage income elasticity results indicate that health is not a luxury good.