Health Expenditure, GDP Growth and the Financial Crisis: A Panel Data Analysis for OECD European Countries

This study analyses the dynamics of Gross Domestic Product and health expenditure for 25 OECD European countries from 1993 to 2015. The novelty of this work is in the joint evaluation of the impact of the Great Recession of the XXI century and the post-crisis period on the growth dynamics of both variables. We estimate a Vector Error Correction model with countries’ fixed effects, and amongst other findings, we conclude that the growth dynamics of health expenditure did not change significantly during the crisis. We perform additional assessments with a third variable related to the population’s health status that show there was a higher rate of people reporting poor health during the crisis and in the following periods, and the health status is caused by GDP rather than health spending. Moreover, we decompose the analysis by health financing scheme, and we observe that countries mostly financed by compulsory health insurance scheme had a worsened health status even though there was no decrease in the growth of health expenditure. These findings are a relevant contribution to the comprehensive and recent literature about the impact of the financial crisis on health. We show there was no direct impact of the Great Recession on the process that determines health expenditure growth, and that a possible deterioration in health during the recession goes beyond the effect on health spending of economic growth.