Is Health Care Necessity or Luxury Good? Panel Data Analysis on the Example of the SEEHN Countries

Abstract

The main goal of this paper is oriented on examining the potential link between economic growth and health expenditure in the South-Eastern European Health Network (SEEHN) countries over the period 1995–2014 by applying panel econometrics. The panel co-integration testing approach and panel VECM are used to investigate the long- and short-run causality between the economic growth, health expenditure and life expectancy (trivariate model). The empirical results show that there is a long-run relationship between the observed variables. It was confirmed that health is a luxury good in the long term, while it is a necessity product in the short term. Finally, it should be noted that economic policy in these countries should be directed to the targeted increase in expenditure on health care, in order to increase overall economic activity. Also, the economic policy should be oriented to adequate combination of public and private financing in health care.