Health expenditure and gross domestic product: causality analysis by income level

Rana, Rezwanul Hasan and Alam, Khorshed ORCID: https://orcid.org/0000-0003-2232-0745 and Gow, Jeff (2020) Health expenditure and gross domestic product: causality analysis by income level. International Journal of Health Economics and Management, 20 (1). pp. 55-77. ISSN 2199-9023

Abstract

The empirical findings on the relationship between gross domestic product (GDP) and health expenditure are diverse. The influence of income levels on this causal relationship is unclear. This study examines if the direction of causality and income elasticity of health expenditure varies with income level. It uses the 1995–2014 panel data of 161 countries divided into four income groups. Unit root, cointegration and causality tests were employed to examine the relationship between GDP and health expenditure. Impulse-response functions and forecast error variance decomposition tests were conducted to measure the responsiveness of health expenditure to changes in GDP. Finally, the common correlated effects mean group method
was used to examine the income elasticity of health expenditure. Findings show that no long term cointegration exists, and the growth in health expenditure and GDP across income levels has a different causal relationship when cross-sectional dependence in the panel is accounted for. About 43% of the variation in global health expenditure growth can be explained by economic growth. Income shocks affect health expenditure of high-income countries more than lower-income countries. Lastly, the income elasticity of health expenditure is less than one for all income levels. Therefore, healthcare is a necessity. In comparison with markets, governments have greater obligation to provide essential health care services. Such results have noticeable policy implications, especially for low-income countries where GDP growth does not cause increased health expenditure.


Statistics for USQ ePrint 37534
Statistics for this ePrint Item
Item Type: Article (Commonwealth Reporting Category C)
Refereed: No
Item Status: Live Archive
Additional Information: Files associated with this item cannot be displayed due to copyright restrictions.
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce (1 July 2013 -)
Faculty/School / Institute/Centre: Historic - Institute for Resilient Regions - Centre for Health, Informatics and Economic Research (1 Aug 2018 - 31 Mar 2020)
Date Deposited: 29 Jan 2020 07:10
Last Modified: 26 May 2020 06:11
Uncontrolled Keywords: health expenditure; gross domestic product; Westerlund cointergration; causality analysis; impulse response function; Common correlated effects
Fields of Research : 14 Economics > 1402 Applied Economics > 140202 Economic Development and Growth
14 Economics > 1402 Applied Economics > 140208 Health Economics
Socio-Economic Objective: C Society > 92 Health > 9204 Public Health (excl. Specific Population Health) > 920499 Public Health (excl. Specific Population Health) not elsewhere classified
B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910103 Economic Growth
Identification Number or DOI: 10.1007/s10754-019-09270-1
URI: http://eprints.usq.edu.au/id/eprint/37534

Actions (login required)

View Item Archive Repository Staff Only