Impact of Health Expenditures on Economic Growth: Evidence from South Asian Countries

Abstract

This study empirically investigates the impact of healthcare expenditure and key health outcomes on the economic growth of South Asian countries using panel data from 2000 to 2022. Employing fixed-effects and random-effects models, the analysis quantifies the relationship between health investment and GDP growth. Descriptive statistics show that the average health expenditure across countries was 3.1% of GDP, while the average life expectancy reached 68.5 years during the study period. Regression results reveal that a 1% increase in healthcare expenditure leads to a 0.52% rise in GDP growth (p < 0.01), indicating a significant impact. Among health outcomes, life expectancy has a positive effect on economic development, with a coefficient of 0.39 (p < 0.05). At the same time, infant mortality rate shows a negative relationship with GDP, with a coefficient of –0.28 (p < 0.01). These results confirm that healthier populations contribute more productively to economic development. The study underscores the vital role of health as a component of human capital and highlights the macroeconomic benefits of investing in healthcare. Policy implications include the need for increased and efficient health spending, improved access to healthcare services, and regionally coordinated efforts to reduce health disparities. Strengthening the healthcare sector in South Asia is not only a social imperative but also an economic strategy for sustainable development and long-term growth.