Assessing the relationship between health and economic growth : Malta's case

Abstract

Sustaining heath care costs is a crucial issue for each government though such increasing costs from the public sector tend to be justified due to social implications. This study was intended to analyse the relationship between health and economic growth and to assess whether the two actually effectuate each other justifying further the rising expenditure. The relationship was examined for Malta where the granger causality test was used to determine the presence and direction of causality. Four variables were incorporated into the model so as to exploit all possibilities of causality, for the period 2000 to 2012. Economic growth was captured by using seasonally adjusted and not seasonally adjusted GDP. On the other hand, health was represented by total health expenditure and by another variable HENM (where capital construction costs incurred between 2000 and 2009 to build the new hospital were deducted from total health expenditure). The model was also run for different period sets: 2000 - 2012, 2000 - 2006 and 2007 - 2012. The findings suggest that causality does not run either way and that economic growth and health expenditure are independent. This means that increased investment in health through health expenditure will not trigger increased economic development and as the economy develops it does not bring about higher expenditure on health.