More Health Expenditure, Better Economic Performance? Empirical Evidence From OECD Countries

This study aims to estimate the optimal health care expenditure in a growing economy. Applying the experiences of countries from the Organization for Economic Co-Operation and Development (OECD) over the period 1990 to 2009, this research introduces the method of system generalized method of moments (GMM) to derive the design of the estimators of the focal variables. Empirical evidence indicates that when the ratio of health spending to gross domestic product (GDP) is less than the optimal level of 7.55%, increases in health spending effectively lead to better economic performance. Above this, more spending does not equate to better care. The real level of health spending in OECD countries is 5.48% of GDP, with a 1.87% economic growth rate. The question which is posed by this study is a pertinent one, especially in the current context of financially constrained health systems around the world. The analytical results of this work will allow policymakers to better allocate scarce resources to achieve their macroeconomic goals.
Source: Inquiry: The Journal of Health Care Organization, Provision, and Financing - Category: Health Management Authors: Tags: Article Source Type: research