Impact of health expenditure on poverty in low- and middle-income countries: An autoregressive distributed lag bounds approach

Abstract

The high costs of complex and numerous medical services, coupled with various diseases and epidemics, result in a substantial financial burden for individuals. The previous studies have focused on extending health financing and access to health services. However, it is crucial to use resources effectively to avoid impoverishment. This study investigates the relationship between poverty rates and health-care expenditure in low- and middle-income countries from 2000 to 2018 by employing the error correction model and autoregressive distributed lag models to identify the long- and short-run relationships and adjustment speed toward equilibrium. The results demonstrate a significant positive relationship between poverty and healthcare expenditure in both the long and short terms. The significant ECT result implies a relatively slow adjustment speed toward equilibrium, indicating that deviations from the equilibrium level take almost 5 years to rectify. These results emphasize the importance of policymakers judiciously weighing the opportunity costs associated with health-care management goals. While extending health financing and promoting access are crucial objectives, the findings of this study emphasize the need to align these efforts with efficient resource utilization to prevent the inadvertent exacerbation of poverty. In conclusion, this study contributes valuable insights to the discourse on health economics, advocating for a balanced and holistic approach to health-care policy formulation and implementation.