Evaluating the Role of GDP Per Capita, Air Pollution and Non-Economic Factors in Determining Health Expenditure: Evidence from Asian Region Using Instrumental Variables Techniques

Abstract

This study investigates the effect of income per capita, air pollution and healthcare services on health expenditure in Asian economies using annual data from 1995 to 2018. The determinants of total health expenditure and public and private sector health expenditures are estimated separately. The Generalised Methods of Moment (GMM) and Instrument Variable Quantile Panel Regression (IVQPR) techniques are employed in this study. The results explain that environmental pollution, the price of health care, urbanisation and the number of hospital beds have positive effects on total health expenditures as well as on public and private health expenditures. Interestingly, income per capita has a negative effect on health expenditure at lower quantiles and a positive at higher quantiles. The proportion of the elderly population has an adverse effect on total health expenditure, while life expectancy shows a positive effect at lower quantiles and a negative effect at higher quantiles on health expenditure. The impact of the number of physicians per capita is found to be negative and significant, while the availability of safe drinking water and education demonstrates a positive effect on health expenditure. Out-of-pocket expenditure and technological progress are positively associated with health expenditure. Smoking is a significant determinant of government health expenditure, but it is difficult to determine the trend of smoking prevalence in Asian economies. The outcomes of this study provide some important insights to policymakers, which can be used to design a more efficient healthcare sector in Asian countries.