Financial development and health expenditure nexus: a global perspective

Rana, Rezwanul Hasan and Alam, Khorshed ORCID: https://orcid.org/0000-0003-2232-0745 and Gow, Jeff (2021) Financial development and health expenditure nexus: a global perspective. International Journal of Finance and Economics, 26 (1). pp. 1050-1063. ISSN 1076-9307


Abstract

Empirical studies have established that financial development is an essential element of economic growth. It has also been established that rising national income has a positive impact on healthcare expenditure. Therefore, an empirical question is whether financial development increases healthcare expenditure for countries at all income levels. This paper examines the relationship between the level of financial development and healthcare expenditure from a global perspective for countries at different income levels for the period of 1995–2014. Common correlated effects mean group approach was employed to account for unobserved heterogeneity and cross-section dependence in the large panel dataset of 159 countries. Additionally, mean group and fixed-effects estimation approaches were used to measure the robustness of the relationship. The association was tested at different levels by sub-grouping countries based on their income. The results indicate that the relationship between financial development and health expenditure is positive and significant. However, the results fluctuate considerably across income levels. The association becomes trivial when income levels rise, with low-income countries showing stronger correlations. Rising incomes and public health expenditure, foster increasing expenditure on health more in countries with a lower level of corruption. Lastly, the statistical outcomes observed are subject to the choice of estimation techniques. Development in the financial sector influences per capita health expenditure positively, however, the association is more prominent for lower-income countries. Policies are proposed to direct the gains from financial development towards healthcare to maximize society's welfare.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to Published version, in accordance with the copyright policy of the publisher.
Faculty/School / Institute/Centre: Historic - Faculty of Business, Education, Law and Arts - School of Commerce (1 Jul 2013 - 17 Jan 2021)
Faculty/School / Institute/Centre: Historic - Faculty of Business, Education, Law and Arts - School of Commerce (1 Jul 2013 - 17 Jan 2021)
Date Deposited: 01 Oct 2020 01:32
Last Modified: 29 Mar 2021 04:49
Uncontrolled Keywords: common correlated effects; cross-section dependence; financial development; global; health expenditure; panel data
Fields of Research (2008): 14 Economics > 1402 Applied Economics > 140208 Health Economics
Fields of Research (2020): 38 ECONOMICS > 3801 Applied economics > 380108 Health economics
Identification Number or DOI: https://doi.org/10.1002/ijfe.1835
URI: http://eprints.usq.edu.au/id/eprint/39819

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