Do political or economic factors drive healthcare financing privatisations? Empirical evidence from OECD countries

This paper adds new empirical evidence to the political economy literature of economic reform. One of the main contributions of this paper is the development of a novel methodology to identify privatisations. The methodology is a combination of the Bai & Perron structural break filter, and validation of the breaks identified by this filter using de jure evidence of reforms. 21 de facto healthcare financing privatisations are identified in a sample of 23 OECD countries. It is analysed which factors trigger or hinder these privatisations. Robust evidence is found in favour of the ‘crises induce reform hypothesis’. That is, severe economic recessions, high levels of unemployment and high interest rates on government debt trigger privatisations. Contrary to theory and conventional wisdom, robust evidence is found that political factors do not have an impact. Ideology, government or political fractionalisation, or major cabinet changes are not found to significantly affect the likelihood of healthcare financing privatisations.