Education and health expenditures can affect the economic growth and development through various channels. Therefore, determinants of education and health expenditures are important for policymaking. This study investigates the mutual interaction between education and health expenditures in a sample of the new EU members over the 2000-2019 duration through causality analysis with cross-sectional dependence. The findings of panel level causality analysis unveil a unidirectional causality from health expenditures to education. Furthermore, the findings of country level causality analysis uncover a unidirectional causality from health expenditures to education in Estonia and Slovak Republic. As a result, health expenditures have a significant influence on education, but education does not have a significant influence on health expenditures in sample of the new EU member states.
TopIntroduction
Education and health are two significant dimensions of human capital and development. Therefore, educational attainment and health status of a country also indicates the economic development level of a country. Furthermore, both education and health can affect the economic growth and development through human capital (Groot and van den Brink- 2006). Therefore, both education and health are among the priority goals of the countries.
In this context, the researchers have extensively explored the determinants and impacts of education and health expenditures in view of their positive economic and social effects. In this context, many researchers have reached the positive influence of education and health expenditures on economic growth and development for different countries and country groups (Marquez-Ramos and Mourelle, 2019; Raghupathi and Raghupathi, 2021; Apostu et al., 2022; Penghui et al., 2022).
On the other hand, factors underlying educational attainment and health expenditures have also been investigated in the empirical literature. In this context, many demographic, institutional, social, and economic determinants of educational attainment have been uncovered (Wilson, 2001; Iqbal et al., 2020). Furthermore, demographic characteristics, gross domestic product, improvements in medical and healthcare, financial sector development, environment, alcohol and tobacco consumption, age dependency ratio, life expectancy, number of hospitals and physicians have been suggested as the significant factors undelying health expenditures (Akca et al., 2017; Raeissi et al., 2019; Hajibabaei et al., 2020).
Both education and health are closely linked, but few researches have analyzed the interplay between education and health yet. Education has potential to affect the health through various channels. First, productive efficiency hypothesis suggests that education raises the productive efficiency of the health inputs (Grossman, 1972, 2006). Secondly, allocative efficiency hypothesis suggests that education increases the health status by optimization of health inputs (Xue et al., 2021). In other words, people with higher educational attainment mainly have higher awareness about detrimental effects of smoking and bad habits on health and in turn adopt a healthier lifestyle (Rosenzweig and Schulz, 1989). Lastly, people with higher educational attainment generally work in jobs with higher wages and in turn have better living standards, higher healthcare and living environment (Cutler and Lleras-Muney, 2012).
On the other hand, poor health can lead lower educational attainment and performance (Suhrcke and de Paz Nieves, 2011). As a result, three different interactions between education and health can be possible:
- 1)
education may be a determinant of health;
- 2)
health may be a determinant of education; and
- 3)
one or more other factors may be simultaneously determinants of education and health (Suhrcke and de Paz Nieves, 2011).