Objective

To analyse the impact of per capita income and environmental air quality variables on health expenditure determinants.

Method

In this study, we analyse the relationship between air pollution and health expenditure in 29 OECD countries over the period 1995-2014. In addition, we test whether our findings differ between countries with higher or lower incomes.

Results

The econometric results show that per capita income has a positive effect on health expenditure, but is not as statistically significant as expected when lag-time is incorporated. In addition, an anchorage effect is observed, which implies that about 80%-90% of previous expenditure explain current expenditure. Our empirical results are quite consistent between groups and when compared with the full sample. Nevertheless, there appear to be some differences when broken down by financing scheme (total, public, and private).

Conclusions

Overall, our findings could be used to clarify the appropriate health expenditure level or to obtain better environmental quality and social well-being. That is, empirical support is provided on how health management and policy makers should include more considerations for the use of cleaner fuels in developed countries.

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