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Health Care Investments and Economic Performance in Portugal: An Industry Level Analysis

Alfredo Pereira (), Rui Pereira and Pedro G. Rodrigues
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Pedro G. Rodrigues: Centro de Administração e Políticas Públicas (CAPP), and Instituto Superior de Ciências Sociais e Políticas (ISCSP), Universidade de Lisboa, Rua Almerindo Lessa, 1300-663 Lisboa, Portugal

No 83, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: We analyze how public and private health care investments affect economic performance in Portugal. With a newly-developed data set for twenty-two industries, we use a vector autoregressive model to estimate the elasticities and marginal products on investment, employment and output. First, every €1 million invested in health care yields significant positive spillover effects, boosting investment and GDP by €24.74 and €20.45 million, respectively, and creating 188 net jobs. Adversely, net exports deteriorate, as most of the new capital goods are imported. Second, while only 28.2% of the total accumulated increase in GDP occurs within a year, investment is front-loaded with a corresponding 73.8%. Over this period, 68 workers are displaced for every €1 million invested. Third, at a disaggregated level, real estate, construction, and transportation and storage are the three industries where output shares increase the most. Employment shares increase the most in professional services, construction, and basic metals. These results have important policy implications. Health investments enhance long-term performance, but are unhelpful counter-cyclically. Also, they will change the industry mix: construction and professional services are the non-traded industries that will benefit the most, while the traded industries of non-metallic minerals, basic metals, and machinery and equipment benefit much less.

Keywords: Health care investment; Economic performance; Industry mix; Vector autoregressive; Portugal (search for similar items in EconPapers)
JEL-codes: C32 E22 H54 O52 L90 L98 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-11, Revised 2017-11
New Economics Papers: this item is included in nep-hea
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