Healthcare Expenditure and Economic Growth: How Important Is the Partnership?

Abstract

An understanding of the relationship between economic variables and healthcare variables will enable a better policy framework for a country. This study focuses on Gross Domestic Product (GDP), healthcare expenditures (HCE) and Out of Pocket expenses (OOP) using an annual data (2000-2015) from Saudi Arabian economy. The study uses statistical techniques such as unit root test, co-integration, linear regressions, Vector Auto Regressions and mediation technique for analysis.The research found that healthcare expenditure and GDP are correlated and co-integrated in long term (3-7 years) and that the GDP can be best explained at a lag of 3 years by healthcare expenditure. Mediation analysis revealed that private health expenses mediate the relationship between government health expenditure and national income.