Health Expenditures, Institutional Quality and Economic Growth

Abstract

The study aims to determine the effect of health expenditures on economic growth while taking into account the quality of health institutions, keeping in view the fact that it’s not just the level, rather quality of expenditures or institutions that matters. Our hypothesis was where institutions are better health investment in health brings more economic growth as compared to those with low quality institutions. To attain that objective the standard neoclassical Solow Growth Model at steady-state level was taken as theoretical framework and made a production function adding institutional quality proxied by government effectiveness along with other variables like health expenditure, primary education completion rate, population growth etc. For estimation purposes, data for the sample of 20 South, East Asian and Pacific developing countries was used for the period 1995-2017. It was found that if health expenditures adjusted for the quality of government expenditures increase by 100%, then the economic growth will increase by 5%.