The Role of Government Health Expenditure in Driving Economic Growth: Evidence from OECD Countries

Abstract

This study examines the influence of government health expenditure and life expectancy on economic growth. The study makes use of panel data analysis and utilizes data from the OECD nations between 2000 and 2021. The study applies panel data analysis using POLS, FEM and REM models and dynamic GMM models. The study also gauges the moderating role of life expectancy on the relationship between government health expenditure and economic growth. The results indicate that government expenditure on health hurts economic growth. A detrimental relationship between life expectancy and economic growth indicates that higher life expectancy could result in elevated healthcare and financial expenses. Nevertheless, the interactive regression model suggests that there is no significant moderation of the association between government expenditure on health and economic growth by life expectancy, implying that the influence of government health expenditure on economic growth is generally unaffected by demographic changes. These findings emphasize the significance of differentiating between the short-term and long-term economic consequences of healthcare expenditure. This study offers insights into the optimization of public spending in OECD nations to promote sustainable economic growth and enhance public health outcomes.