Direct and indirect effects of health expenditure on economic growth in China

The main social contradictions in China have changed: the core concept is high quality development. Health care investment improves the health of residents and promotes regional economic growth.

To analyse the direct and indirect economic effects of health expenditure during 2012-2018 and to test whether China's investment in health care meets the requirements for high quality development.

We selected spatial panel data reflecting the input and output of health resources. We used the knowledge production function and a model of spatial economics to conduct empirical analysis of 31 provinces to show the effects of health expenditure on economic growth.

Economic development (LnGDP) was the dependent variable; explanatory variables included health financial input (LnHI), health personnel input (LnHR), health assets (LnCW) and health insurance expenditure (LnHIE). The regression coefficients for indirect, direct and total effects of LnHI were 0.4346, 0.0623 and 0.4970 respectively (all statistically significant). The direct effect coefficient of LnHR (0.3343) was statistically significant. The regression coefficients for the indirect and total effects were -0.6779 and -0.3436, respectively. The direct, indirect and total effect regression coefficients for LnCW and LnHIE were all statistically significant.

Both LnHI and LnHIE positively promote economic growth within provinces and in neighbouring provinces, i.e. there are direct and indirect positive effects from investing in health care. Increasing the input of health care personnel can promote the economic growth of a province but not that of neighbouring provinces. Overall planning and coordinated development will facilitate high quality development and economic advancement.