Jung, Hongjoo Kim, Dohyun / SKKU The Effect of Health Care Expenditure on Economic Growth in OECD Countries -Focusing on the Expenditure Mixes and Financing Arrangements- Moscow, Russia July 29, 2014 Jung, Hongjoo Kim, Dohyun / SKKU

1. Introduction Macroeconomists’ interest in health is that a healthy population is likely to be more productive and improving the health status of the population should foster economic growth(Hartwig, 2010)

2. Health capital and Economic growth - Since Schultz(1961) first proposed health as human capital, health is important factor productivity improvement for the future - Mankiw, Romer, and Weil(1992) : education as a human capital - Knowles and Owen(1995) : health variable as a human capital - health capital measurement : life expectancy - Knowles and Owen(1995), Bloom et al.(2001), McDonald and Roberts(2002), Li and Huang(2010) : adult surviving rate - Bhargava et al(2001), Jamison et al.(2005) : health expenditure - Heshimati(2001), Gyimah-Brempong & Wilson(2004), Rivera and Currais(2004), Hartwig(2010)

2. Health capital and Economic growth - `life expectancy’, `adult surviving rate’ variables is similar effects on economic growth - but, `health care expenditure’ variable : controversial in high income country (Weil, 2007) : positive Heshimati(2001)와 Rivera and Currais(1999a, 1999b, 2003, 2004) : insiginificant Hartwig(2008) Knowles and Owen(1995, 1997), McDonald and Roberts(2002) : negative Bhargava et al.(2001)

Health care expenditure 3. Empirical model The objective of this paper is demonstrating an effect of population health on economic growth Study on the economic growth of the health care expenditure mixes and financing arrangements adopted in 26 OECD countries Health capital Economic growth Health care expenditure GDP per capita Total expenditure public expenditure Rivera and Currais(2004) Financing source NHS / NHI private expenditure National Health Service(NHS) : mainly funded ultimately from general taxation National Health Insurance(NHI) : mainly funded ultimately from compulsory contributions

3. Empirical model Model (using System GMM) Variables Variables Definition source GDP Real GDP per capita (US$ PPP) OECD statistics THE Total health expenditure per capita (US$ PPP) PHE Public health expenditure per capita (US$ PPP) PFHE Capital formation health expenditure per capita (US$ PPP) PCHE Public current health expenditure per capita (US$ PPP) PIHE Private insurance per capita (US$ PPP) PEE Primary and middle school enrollment rate World Bank Edstats TI Total investment rate PGRW Population growth rate

4. Data Descriptions Descriptive statistics of variables(26 OECD) NOB. Mean S.D. Max. Min. 분석기간1) GDP 664 52386.16 15010.06 95720.32 14105.08 1980-2008 THE 662 1687.79 983.61 5229.80 88.70 PHE 639 1261.35 761.15 4408.40 19.10 PFHE 512 58.31 43.20 273.00 2.20 PCHE 1193.16 731.13 4151.00 16.50 PIHE 387 110.6718 122.53 509.30 0.30 PEE 642 102.04 8.64 135.22 83.24 TI 22.71 5.42 47.79 10.39 PGRW 0.56 1.13 26.45 -0.083

4. Data Descriptions Descriptive statistics of variables(NHS vs NHI) NOB. Mean Max. Min. GDP 269 52888.97 23366.84 12437.92 395 52043.90 95719.40 14105.88 THE 1761.15 4052.29 276.63 393 1637.58 5229.98 88.70 PHE 1369.50 3430.84 177.71 370 1182.71 4408.59 19.10 PFHE 222 1.05 1.22 1.02 290 1.18 1.01 PCHE 1287.80 3268.14 162.59 1120.64 4151.45 16.50 PIHE 150 97.77 509.33 .50 233 120.86 505.01 .30 PEE 256 103.12 131.61 83.23 386 101.32 135.21 83.62 TI 21.37 42.30 11.50 23.62 47.79 10.39 PGRW .64 2.86 -.74 .53 26.45 -.83

4. Data Descriptions unbalanced panel (1980-2008) - 26 OECD countries No. NHS Australia, Canada, Denmark, Iceland, Ireland, Italy, Newzealand, Portugal, Sweden, UK 10 NHI Austria, Belgium, Czech, Finland, France, Germany, Greece, Hungary, Japan, Korea, Mexico, Netherland, Norway, Poland, Spain, Switzerland 16

5. Empirical Analysis Health expenditure and economic growth OECD 26개 국가 Financing source Unbalanced NHS NHI THE + PHE PFHE - (-) PCHE PIHE (+) Footnote: ( ) means statistically insignificant results

5. Empirical Analysis Footnote: 1) ***, **, * mean 1%, 5%, 10% significance 2) figures in ( ) are standard deviations

5. Empirical Analysis (NHS)

5. Empirical Analysis (NHI)

6. Conclusions This paper presents the results on the economic growth consequences of the health care expenditure mixes and financing arrangements adopted in 26 OECD countries The general finding of this study shows health care expenditure contributes to positive effect on economic growth from 1980 to 2008

6. Conclusions However, their relative importance varies by source of payment and arrangement of financing - First, Public and public current health care expenditures tend to have positive economic growth effects. (Heshimati(2001), Rivera and Currais(2004)) The Private insurance has not significant results. The results using a balanced panel from 1999-2008 show conflicting effects in total, public, and public current health care expenditures. - Second, for both NHS and NHI countries total, public health care expenditures tend to foster economic growth. However, the public current health care expenditures, and the private insurance tend to retard economic growth in NHS countries, and encourage in NHI countries.