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Does it pay to pay for health? How health expenditure translates into GDP growth in OECD countries

Author

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  • Michał Kowalczuk

    (Warsaw School of Economics)

  • Andrzej Torój

    (Warsaw School of Economics)

Abstract

We estimate the impact of health expenditure on GDP in high-income countries (OECD sample) by adding more economic structure of theoretical transmission channels from health spending to productive capacity of the economy, as compared to reduced-form regressions widespread in the literature. Our approach is based on three separate panel regressions, simulating the effect of presenteeism and absenteeism (via labour productivity), long-term working disability (via employment rate) and mortality (via probability of death during working age). In all three cases, health expenditure has turned out to act in a GDP-improving, statistically significant way.

Suggested Citation

  • Michał Kowalczuk & Andrzej Torój, 2015. "Does it pay to pay for health? How health expenditure translates into GDP growth in OECD countries," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 39, pages 103-118.
  • Handle: RePEc:sgh:annals:i:39:y:2015:p:103-118
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    References listed on IDEAS

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    1. Jacob Novignon & Solomon Olakojo & Justice Nonvignon, 2012. "The effects of public and private health care expenditure on health status in sub-Saharan Africa: new evidence from panel data analysis," Health Economics Review, Springer, vol. 2(1), pages 1-8, December.
    2. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    3. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    4. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    5. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
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    Cited by:

    1. repec:sgh:gosnar:y:2018:i:1:p:137-157 is not listed on IDEAS

    More about this item

    Keywords

    health expenditure; indirect cost of illness; healthcare efficiency; panel estimation;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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