The influence of (public) health expenditure on longevity

We report new evidence on the contribution of health expenditure to increasing life expectancy in OECD countries, differentiating the effects of public and private health expenditures.

A theoretical model is presented and estimated though a cross-country fixed effects multiple regression analysis for a sample of OECD countries over the period 1980-2000.

Although the effect of aggregate health expenditure is not conclusive, public health expenditure plays a significant role in enhancing longevity. However, its influence diminishes as the size of the public health sector on GDP expands, reaching a maximum around the 8 %.

With the influence of public health expenditure being positive, the ambiguous effect of the aggregate expenditure suggests that the weight of public and private health sectors matters, the second having a lower impact on longevity. This might explain the poor evolution of the life expectancy in countries with a high amount of private resources devoted to health. In such cases, an extension of public services could give rise to a better outcome from the overall health investment.