Investigating the Relationship between Health Expenditures and Human Development Index: A Cross Country Analysis

In recent decades, the human development index has become one of the most practical indicators for measuring the level of development in countries. There are several factors that affect the human development index, including health expenditures that increase human development along with manpower and physical capital. The purpose of this study was to investigate the effect of health costs on human development index for the period 2005-18.

The present study examined the effects of health on human development index in different countries. The study population includes 187 countries with 3 types of divisions (continental, oil and income distribution). The data used by the World Bank were collected and analyzed using data panel regression or composite data.

Findings from estimation of models indicated that health expenditures in continents of Europe, South America, Africa and Oceania had a positive and significant effect on human development index. But in Asia, the effect of health expenditure was negative and significant. The effect of per capita Gross Domestic Product (GDP) on the continents of Asia, North and South America, Africa and Oceania had been positive and significant, but it was positive and insignificant in continental Europe. In oil-rich countries, the effect of educational expenditures, GDP per capita on human development index was positive and significant, but the effect of health expenditures was positive and insignificant. Also, the effect of mortality index on human development index had been negative and significant. Similar results had been obtained for non-oil countries, albeit with different coefficients. The percentage of health expenditures, compared with GDP, had a direct and significant relationship with the human development index in countries with relatively equal and relatively unequal income distribution; considering the fact that this value for the group of countries with completely unequal income distribution suggested an insignificant value in the model. The percentage of educational expenditures showed a direct and significant relationship on human development in all income groups, and GDP per capita for all groups with different income distributions had a significant and direct effect on the human development index. Also, the under-5 mortality rate in all groups with different income distributions had an inverse and significant relationship with the human development index.

Results showed a significant effect of health expenditures on improvement of the health status and development of the studied countries except oil countries, North America and countries with unequal income distribution. Furthermore, increasing the cost of health care is an important step in achieving countries' development goals. Therefore, it is necessary for managers and policy makers of the health system to consider the efficiency in allocating health expenditures to different sectors.