IMPACT OF HEALTH EXPENDITURES ON SOCIAL WELFARE AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES

Abstract

The paper examines the impacts of social and economic growth in 81 developing nations, as influenced by public and private health expenditure. It is estimated that increased investment in health accelerates GDP growth and improves well-being, as indicated by the Human Development Index (HDI). It analyses annual data from 2000 to 2024 and estimates two dynamic panel models: the economic growth model and the social welfare model. To control endogeneity, reverse causality, unobserved heterogeneity and cross-country dependence, the System Generalised Method of Moments (System GMM) is used. The models include significant demographic and economic controls, including fertility, unemployment, labour force growth, and gross fixed capital formation. The effect of the public health expenditure on economic growth and social welfare is high and effective. The other effect of private health expenditure is that it raises welfare and affects GDP growth, albeit negatively, but positively. The expansion of the labour force and capital formation also promote development, whereas high fertility and unemployment inhibit it. Diagnostic tests ensure the validity and robustness of GMM estimators. Based on the results, it is important to note that sustained and properly directed investment in health systems can help bolster productivity, improve living standards, and contribute to long-term growth in resource-blinking economies. This paper provides a combined dynamic model in which health expenditure is analysed alongside economic and social welfare. It provides current evidence from a large sample of developing nations and adds to the policy discussion on the importance of health investment in inclusive development.