The Determinants of Health Expenditures in E7 Countries

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Health expenses are of vital importance in terms of contributing to human capital and overall development. This article utilizes annual panel data to explore the determinants of health expenditures in the E7 countries covering the period from 2000 to 2020. The analysis employs various variables to measure the impact of macroeconomic, demographic, and environmental factors on health expenditure. As cross-sectional dependence and heterogeneity are detected among the residuals of the panel model, the Augmented Mean Group (AMG) estimator is employed to quantify long-run relationships. The results reveal that macroeconomic variables and environmental pollution have a more pronounced impact on health expenditures compared to demographic factors. Moreover, the income elasticity of health expenditures estimates is close to unity, implying that health expenditures should be taken as a necessity rather than a luxury.