Estimating private health expenditures within a dynamic consumption allocation model [ Working Paper 04-08 - 18/02/2008]

This paper presents a model of Belgian household consumption, with a focus on private health expenditures. To do so, we have formulated and estimated an extension of the classic Almost Ideal Demand System. The original model has been modified by introducing a dynamic adjustment mechanism and by the inclusion of demographic variables. These were expected to capture shifts in consumption patterns related to the changing age composition of the population. The results confirm the expected effects: the ageing of the population is likely to increase the share of private health expenditures (and consumer durables) in the household budget over the coming decades.