Healthcare Expenditure and Economic Growth in Developing Countries

There has been a growing interest in examining the relationship between income and health expenditures. Although there are differences in the economic structure and health expenditures of the countries in the panel, there is a tendency for an increase in both per capita gross domestic product and health expenditures for all. Therefore, a modified version of the Granger (1969) causality test proposed by Toda and Yamamoto (1995), and Dolado and Lütkepohl (1996) was used in emerging markets in Europe and Middle East African and Asian countries over the period from 1995 to 2013. According to the analysis of the results, a two way causality is found for the Czech Republic and Russian Federation. The evidence from the Egypt, Hungary, Korean Republic, South Africa, and the Philippines supports the health view over the income view, while the evidence from Greece, Poland, the United Arab Emirates, China, Indonesia, and the Korean Republic supports the income view over the health view. The empirical results have indicated that income is an important factor in explaining the difference in healthcare expenditures among countries. Therefore, it appears that increases in income level stimulate healthcare expenditures for some of the emerging market economies.