An explanation for increasing health expenditure

As we can see in the following graph, most of the countries across the continent are spending a larger share of consumption in health, at least in the period analyzed, from 1995 to 2006. A study for United States, argue that growth in health expenditure is the rational response to per capita income growth. At the CISS we would like to know if that observation made for United States holds for other countries of Latin America and the Caribbean. We are calibrating a very simple model in order to do so. Preliminary results show that indeed, in most of the countries of the continent, the elasticity of health expenditure with respect to income is higher than one (see the second graph). This finding means that, if countries behave rational, the share of health expenditure will grow as income grows. In this model more health expenditure produce more health, which is more demanded as persons become richer.