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Health expenditure, human capital, and economic growth: an empirical study of developing countries

Xiaoxuan Yang ()
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Xiaoxuan Yang: University of Chicago

International Journal of Health Economics and Management, 2020, vol. 20, issue 2, No 3, 163-176

Abstract: Abstract Social security systems were successively established in most developing countries in the 1980s and 1990s. To ensure the long-term sustainability of these newly established systems it is essential to carefully monitor the economic impact. Based on the panel data of 21 developing countries from 2000 to 2016, this paper is the first to apply the panel threshold model to empirically analyze the relationship between national health expenditures and economic growth under different levels of human capital. The results show that health expenditure and economic growth have significant interval effects because of the different levels of human capital. Specifically, when human capital levels are low, health expenditure is significantly negatively correlated with economic growth. When human capital is at a medium level, health expenditure has a positive but not significant impact on economic growth. When the level of human capital is high, the positive economic impact of the health expenditure is significantly enhanced. In addition, subgroup analyses indicate that population aging and low fertility aggravate the negative impact of health expenditures on economic growth. This study provides reliable analysis and can be used by developing countries to maintain a long-term sustainable social security system.

Keywords: Health expenditure; Human capital; Economic growth; Developing countries; Panel threshold model (search for similar items in EconPapers)
JEL-codes: I15 I25 I38 C01 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10754-019-09275-w

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

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