EconPapers    
Economics at your fingertips  
 

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

Rezwanul Hasan Rana (), Khorshed Alam () and Jeff Gow ()
Additional contact information
Rezwanul Hasan Rana: University of Southern Queensland
Khorshed Alam: University of Southern Queensland

International Journal of Health Economics and Management, 2020, vol. 20, issue 1, No 4, 55-77

Abstract: 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.

Keywords: Health expenditure; Gross domestic product; Westerlund cointergration; Causality analysis; Impulse response function; Common correlated effects (search for similar items in EconPapers)
JEL-codes: C55 I10 I15 O1 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10754-019-09270-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ijhcfe:v:20:y:2020:i:1:d:10.1007_s10754-019-09270-1

Ordering information: This journal article can be ordered from
http://www.springer. ... th/journal/10754/PS2

DOI: 10.1007/s10754-019-09270-1

Access Statistics for this article

International Journal of Health Economics and Management is currently edited by Leemore Dafny, Robert Town, Mark Pauly, David Dranove and Pedro Pita Barros

More articles in International Journal of Health Economics and Management from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-05-02
Handle: RePEc:kap:ijhcfe:v:20:y:2020:i:1:d:10.1007_s10754-019-09270-1