A spatiotemporal analysis of public pharmaceutical expenditure

A regression model for per capita public pharmaceutical expenditure, based on aggregate data from fifty Spanish provinces, observed annually for the period 1996-2002 is analyzed. The necessity of simultaneously controlling for dynamic patterns and spatial autocorrelation is demonstrated. As the aim of the present and related studies of small-area variation is to control for spatial association rather than to formulate it as an explicit part of a model, the traditional application of parametric spatial autocorrelation or spatial autoregression specifications seems unnecessarily restrictive and superfluous. The present study analyzes the effects of spatial association using a non-parametric spatial filtering approach. The importance of adjusting for spatial association is confirmed, but it is further shown that the parametric and the non-parametric approaches may lead to substantially different conclusions regarding explanation of pharmaceutical expenditure variations. Thus, the need for further evidence on the implications of spatial association-and the recognition that this is more than just spatial autocorrelation and/or spatial autoregression-when analyzing complex large area behavior using small area data is demonstrated.