Economic growth effects of public health expenditure in OECD countries: An empirical study using the dynamic panel threshold model

Abstract

BackgroundMember countries of the Organization for Economic Co-operation and Development (OECD) have experienced a downward trend in capital and macro investment returns. Countries rely on investments in healthcare and health-related sectors to ensure continuous input and an efficient labor market. Public healthcare coverage is a social welfare policy implemented by governments, which contributes to improving human capital quality and ensuring stable economic growth. MethodsThis study employs a method that combines theoretical modeling and empirical testing examining 33 OECD countries from 2001 to 2017. We first construct a nonlinear dynamic panel threshold model to examine the impact of public health spending on economic growth. We then employ the model to empirically analyze the threshold effect of public health expenditure on economic growth, validating the effectiveness of our theoretical model. ResultsWhen the level of household consumption is below the 9.63 threshold, the effect of public health expenditure on economic growth is significantly negative (p < 0.1); however, when consumption exceeds the 9.63 threshold, the effect becomes significantly positive (p < 0.05). Similarly, when employee wages are below the 10.57 threshold, the effect of public health expenditure on economic growth is significantly negative (p > 0.1), and it becomes significantly positive when it exceeds 10.57 (p < 0.5). Finally, when the level of physical capital investment falls below the 8.73 threshold, the effect of public health expenditure on economic growth is significantly negative (p < 0.5), and it becomes significantly positive when it exceeds 8.73 (p < 0.5). The positive impact of public health expenditure on economic growth gradually strengthens as household consumption, employee wages, and per capita physical capital investment continue to rise. ConclusionsIn an economic environment with higher household consumption, employee wages, and physical capital investment, public health expenditure will significantly promote economic growth.