Re-Examining the Impact of Public Health Expenditure on Longevity: The Critical Role of Human Capital

Abstract

This study examines the impact of public health expenditure on life expectancy controlling for human capital. The ADF nonstationarity test and the ADRL bound test for cointegration were applied on annual based time series data from 1981-2019. Both the F- and t-statistic of the bound test for cointegration indicated long run relationship among the variables considered in the model. From the regression results, the lagged value of LE is positive and significant in explaining current year changes in LE. The lagged values of PHE and GDP also had positive and significant coefficients revealing similar effects on LE in the short run. HC also reveal a positive and significant impact positively on LE in the current year. However, the contribution of the variables considered in the model to life expectancy is rather marginal or weak. The ECT_t-1 coefficient suggests that LE adjusts to long run equilibrium through the channels of lagged values of LE, PHE, GDP and HC at the speed of 5%. The coefficient is negative and statistically significant as required by economic theory. However, the ECT_t-1 coefficient shows that the speed of adjustment to long run equilibrium due to short run distortions is quite slow. The study recommends measures to improve public health services coverage such as increased public health expenditure on health to the desired limit of 15% of the yearly budgets and enhanced human capital development