Mutual Relationship between Government Health Expenditures and Economic Growth in Selected Countries of MENA Region: Simultaneous Equation System Approach

Health has an important impact on economic growth through increasing the ability of the national human resources. Health promotion leads to healthier and more productive people. Also, proper health and well-being will improve labor ability, which will subsequently lead to higher production and economic growth. One of the important issues facing the governments is the share of health expenditure allocated to the health sector. This paper uses the estimation of simultaneous equations in the framework of panel data models and through the use of instrumental variables and the two-stage least squares method (G2SLS) to investigate the relationship between government health expenditures and economic growth in selected countries of the MENA region during 1995-2014. The results indicate the effect of government health expenditures on economic growth and vice-versa in the selected countries. The results of the study can be used in designing growth policies and improving human capital.