How relevant is environmental quality to per capita health expenditures? Empirical evidence from panel of developing countries

Adamu Yahaya, Norashidah Mohamed Nor, Muzafar Shah Habibullah, Judhiana Abd. Ghani, Zaleha Mohd Noor

Developing countries have witnessed economic growth as their GDP keeps increasing steadily over the years. The growth led to higher energy consumption which eventually leads to increase in air pollutions that pose a danger to human health. People's healthcare demand, in turn, increase due to the changes in the socioeconomic life and improvement in the health technology. This study is an attempt to investigate the impact of environmental quality on per capital health expenditure in 125 developing countries within a panel cointegration framework from 1995 to 2012. We found out that a long-run relationship exists between per capita health expenditure and all explanatory variables as they were panel cointegrated. The explanatory variables were found to be statistically significant in explaining the per capita health expenditure. The result further revealed that CO2 has the highest explanatory power on the per capita health expenditure. The impact of the explanatory power of the variables is greater in the long-run compared to the short-run. Based on this result, we conclude that environmental quality is a powerful determinant of health expenditure in developing countries. Therefore, developing countries should as a matter of health care policy give provision of healthy air a priority via effective policy implementation on environmental management and control measures to lessen the pressure on health care expenditure. Moreover more environmental proxies with alternative methods should be considered in the future research.