The dynamic association between healthcare spending, CO2 emissions, and human development index in OECD countries: evidence from panel VAR model

Abstract

The present research aims to inspect the bidirectional association among healthcare expenditures, carbon dioxide (CO2) emissions, and human development index (HDI). For this purpose, we employ a balanced panel data set of 33 OECD countries for the period 2006–2016. A newly developed econometric approach known as panel vector autoregression based on the generalized method of moments estimations is employed to test this relationship. The key empirical findings reveal that (1) all of the three main variables namely healthcare expenditures, CO2 emissions, and HDI exhibit a causal relationship, (2) there exists bidirectional causality between healthcare expenditures and CO2 emissions which suggests that CO2 emissions significantly escalate the healthcare expenditures in OECD countries. Likewise, healthcare investments also increase emissions due to higher use of energy, (3) positive bidirectional causation between healthcare expenditures and HDI entails that investments in health infrastructure lead to improvement in the overall quality of living in these countries. Moreover, a higher HDI reinforces the governments to increase their healthcare spending, and (4) there is a unidirectional negative causality between CO2 emissions and HDI which implies that carbon emissions significantly deteriorate human health and wellness in these countries. Based on these empirical outcomes, the policy prescriptions are discussed for the relevant authorities to curtail emission and enhance the quality of living of the masses.