Nonlinear Granger Causality between Health Care Expenditure and Economic Growth in the OECD and Major Developing Countries

Liping Ye and Xinping Zhang
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Liping Ye: School of Medicine and Health Management, Tongji Medical College, Huazhong University of Science and Technology, Wuhan 430030, China
Xinping Zhang: School of Medicine and Health Management, Tongji Medical College, Huazhong University of Science and Technology, Wuhan 430030, China

IJERPH, 2018, vol. 15, issue 9, 1-16

Abstract: Differing from previous studies ignoring the nonlinear features, this study employs both the linear and nonlinear Granger causality tests to examine the complex causal relationship between health care expenditure and economic growth among 15 Organisation for Economic Co-operation and Development (OECD) and 5 major developing countries. Some interesting findings can be obtained as follows: (1) For Australia, Austria, and UK, linear and nonlinear Granger causality does not exist between them. A unidirectional linear or nonlinear causality running from economic growth to health care expenditure can be found for Ireland, Korea, Portugal, and India. For these seven countries, health or fiscal policy related to health spending will not have an impact on economic growth; (2) For Belgium, Norway, and Mexico, only a unidirectional linear causality runs from health care expenditure to economic growth, while bidirectional linear causality can be found for Canada, Finland, Iceland, New Zealand, Spain, Brazil, and South Africa. Especially for the US, China, and Japan, a unidirectional nonlinear causality exists from health spending to economic growth. To improve the quality of national health, life quality and happiness, these 13 countries should actively look to optimise policy related to health care expenditure, such as by enhancing the efficiency of health costs to promote sustainable economic development.

Keywords: health care expenditure; economic growth; Linear Granger causality test; Nonlinear Granger causality test (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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