Health Care Investments and Economic Performance in Portugal: An Industry Level Analysis

We analyze how public and private health care investments affect economic performance in Portugal. With a newly-developed data set for twenty-two industries, we use a vector autoregressive model to estimate the elasticities and marginal products on investment, employment and output. First, every €1 million invested in health care yields significant positive spillover effects, boosting investment and GDP by €24.74 and €20.45 million, respectively, and creating 188 net jobs. Adversely, net exports deteriorate, as most of the new capital goods are imported. Second, while only 28.2% of the total accumulated increase in GDP occurs within a year, investment is front-loaded with a corresponding 73.8%. Over this period, 68 workers are displaced for every €1 million invested. Third, at a disaggregated level, real estate, construction, and transportation and storage are the three industries where output shares increase the most. Employment shares increase the most in professional services, construction, and basic metals. These results have important policy implications. Health investments enhance long-term performance, but are unhelpful counter-cyclically. Also, they will change the industry mix: construction and professional services are the non-traded industries that will benefit the most, while the traded industries of non-metallic minerals, basic metals, and machinery and equipment benefit much less.