Nonlinear Granger Causality between Health Care Expenditure and Economic Growth in the OECD and Major Developing Countries.

Liping Ye,Xinping Zhang

doi:10.3390/ijerph15091953

Abstract

Differing from previous studies ignoring the nonlinear features, this study employs both the linear and nonlinear Granger causality tests to examine the complex causal relationship between health care expenditure and economic growth among 15 Organisation for Economic Co-operation and Development (OECD) and 5 major developing countries. Some interesting findings can be obtained as follows: (1) For Australia, Austria, and UK, linear and nonlinear Granger causality does not exist between them. A unidirectional linear or nonlinear causality running from economic growth to health care expenditure can be found for Ireland, Korea, Portugal, and India. For these seven countries, health or fiscal policy related to health spending will not have an impact on economic growth; (2) For Belgium, Norway, and Mexico, only a unidirectional linear causality runs from health care expenditure to economic growth, while bidirectional linear causality can be found for Canada, Finland, Iceland, New Zealand, Spain, Brazil, and South Africa. Especially for the US, China, and Japan, a unidirectional nonlinear causality exists from health spending to economic growth. To improve the quality of national health, life quality and happiness, these 13 countries should actively look to optimise policy related to health care expenditure, such as by enhancing the efficiency of health costs to promote sustainable economic development.

Highlights

The causal relationship between health care expenditure and economic growth is a widely concerned topic
To test whether the per capita health care expenditure embeds nonlinearity characteristics, the residual time series obtained by the Vector autoregression (VAR) model is performed using the BDS test
The nonlinear Granger causality test is more appropriate for examining the nonlinear causal relationship between per capita health care expenditure and per capita Gross Domestic Product (GDP) in these countries comparing to the standard linear Granger causality test

Summary

Introduction

The causal relationship between health care expenditure and economic growth is a widely concerned topic. Health care expenditure is different depending on the country and time period, many countries regard health care expenditure as a means of promoting economic growth [1,2]. Increased spending on health care is able to provide people with the better care, which can improve the life expectancy, social welfare, and overall security of a society. Healthier workers can work more efficiently and for longer periods, indicating that spending more on health can improve people’s health conditions and result in raising labour productivity. Countries with higher per capita income have more per capita health care expenditure, which indicates that the rapid economic growth may contribute to an increase in the health spending [4]

Methods

Results

Discussion

Conclusion