Abstract
This paper explores the Granger-causality relationship between real GDP per capita and real health care expenditure per capita for Jordan during 1995 through 2013. The findings point out that the dominant type of Granger-causality is unidirectional. Furthermore, income elasticity of health expenditure is less than 1, which means that health care is a necessary good in Jordan. To this end, policies must be aimed at raising national income to improve eventually the well-being of the population.
Highlights
The health care expenditure and Gross Domestic Product (GDP) relationship has been investigated extensively in literature of health economics
If a significant percentage of change in per capita health care expenditure can be explained by variations in per capita GDP, it is called direct causality (Erdil and Yetkiner, 2009)
One-way causality runs from GDP to health in low- and middle-income countries, while the reverse is true for high-income countries
Summary
The health care expenditure and Gross Domestic Product (GDP) relationship has been investigated extensively in literature of health economics. Causality between health care expenditure and Gross Domestic Product (GDP) can be in either or both directions. To test for the existence of causality requires first to test if present and former values of health care expenditure can be used in forecasting future values for GDP. The main question is whether health care spending is a necessary or a luxury services (Lago-Peñas et al, 2013). The debate on this relationship was whether income elasticity of health care expenditure is more or less than 1. If income elasticity is more than one, health care expenditure is considered to be a “luxury” good
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