Health Expenditure, Literacy and Economic Growth: PMG Evidence from Asian Countries

Well-functioning health sector and high literacy rates are desirable features of an economy. To explicate their role for Asian countries, in economic growth this paper estimates their role using pooled mean group (PMG) estimation technique. Long run relationship is examined for a sample of 26 Asian countries with data for 1990 to 2012. PMG estimates are augmented by other estimators like FMOLS and DOLS to quantify the contribution of health sector and literacy. Results show the presence of long run relationship between income per capita, health expenditures, and literacy rate. Unicausality is found from income per capita to health expenditures and bi-causality between income per capita and literacy rates. Results reveal that higher literacy rates lead to increased health expenditures due to increase demand of health services. Recommendations are made on the basis of empirical analysis.