Effect of Aging on Health Expenditure and Gross Domestic Product in Selected Countries by A Dynamic Panel Approach

An increase in the aging population can affect economic growth and Gross Domestic Product (GDP) by reducing labor supply, reducing productivity, and increasing burden on the population. The current study aimed to explain the economic effects of aging and examined the relationship between aging, health expenditure, and GDP.  

This descriptive-analytical study was conducted using the data of global development indicators, published by World Bank for the selected countries from 1996 to 2017. The study population included 40 selected countries with moderate to high income. The data related to each country were extracted. Later, the dynamic panel data approach and generalized method of moments (GMM) were applied to analyze the information. Furthermore, the generalized method of moments regression was also used by Stata 14. The findings showed that aging had a negative and significant effect on GDP, so that increase of 1.00 % in the elderly population decreased the GDP growth by 2.14 %. Furthermore, countries' investment in the health sector had a positive and significant effect on the GDP. In this regard, an increase of 1.00 % in health and treatment costs improved the GPD by 0.03 %. Multiplication of  aging in health expenditure and inflation index had a significant negative impact on the growth of GDP per capita. The results of this study showed that population aging reduced GDP by absorbing a part of the health expenditure. Therefore, in order to reduce the negative effects of this phenomenon, a long-term approach to budgeting is required to strengthen and support the pension fund, plan more comprehensive health insurance coverage for the elderly, and develop related institutions.