The Determinants of Health Expenditures with an Emphasis on Population Ageing: A Country-Level Panel Data Analysis

In the past few decades, the rapid growth of health expenditure among countries and considerable differences between per capita health expenditures in different countries, have led to extensive studies about determinants of health expenditures. The aim of this study is to identify such factors across different countries which can be put into distinct income groups. For this purpose, panel data regression technique for 148 countries from 1995 to 2013 with fixed effects model was used. The results show that, in contrast to previous studies which use macro data analysis, the effect of population ageing in upper-middle- and high-income countries, which face the greatest rate of population ageing, on health expenditures was shown to be positive at a significant level. Income as being not the sole factor associated with health expenditure, our results show that life expectation and the share of young population (under 14) are among important factors. Another driver of health expenditure was revealed to be the total government expenditure as a share of GDP that was insignificant only for low income countries. This observation might reflect the trade off in domestic health expenditures made by the low-income countries as a result of receiving international aids. The income elasticity for all groups was below unity and suggestive of health care to be a necessity good in all countries.