From a 1991 Cato Journal, Santerre, et al. estimate of an infant mortality rate equation using a sample of 20 OECD countries during the six adjacent half decades from 1960 to 1985 and a fixed effects model. Following are the abbreviated results:

IMR= 3.93 - 0.069TIME 0.892RGDP - 0.539PHYS + 0.707URBAN 0.004FLFPR - 0.135ED

(2.60) (1.112)(6.83)(6.89) (4.21) (1.21 (2.34)

Adjusted R² = 0.954, N = 110

All variables are logarithms so the coefficients can be treated as elasticities. Numbers below the estimated coefficients are T-statistics.

IMR = infant mortality rate

TIME = a time trend from 1 to 5, capturing changing technology and knowledge

RGDP = Real Gross domestic Product per capita

PHYS = # of physicians per capita

URBAN = % of the population in urban countries

FLFPR = female labor force participation rate

ED = level of education

Based upon these findings answer the following:

1. What percent of the variation in health care spending is explained by the various independent variables?

1. Using health production theory as much as possible, provide a hypothesis or theory about the relationship (direct or inverse) between the first 3 independent variables and the infant mortality rate.

1. Are those 3 hypotheses supported by the regression results? Explain.

1. Given that the estimated coefficients are also elasticities, interpret the coefficients on PHYS and RGDP.

1. Should we expect the physician elasticity to remain constant if increasingly more physicians are employed in the typical health economy? Why or why not?

1. Based upon those findings explain why the infant mortality rate may be so much higher in Turkey than Japan?