The Effect of Health Care Expenditure on GDP Growth

The thesis analyzes the relationship between health care expenditure and economic growth in the Czech Republic and Austria between 1995 and 2010. Recently, economists are increasingly aware of and examine the relationship between health and productivity, so the aim of the work is to verify the hypothesis that the health care expenditures really affect the growth of gross domestic product and that richer countries have a higher elasticity of health care expenditure. First, Cobb-Douglas production function, which is based on a model from article written by Bakare and Olubokun (2011), is estimated by using the least squares method. The thesis also relies on the work of M R Scheffler (2004), who inferred claim about elasticity of health care expenditure in developed and developing countries from his model. Subsequently, the elasticity of total, public and private health care expenditure at GDP growth in both countries is determined by second regression model. The results have confirmed both hypotheses. Therefore the analysis shows that spending on health influence the growth of gross domestic product, what is in line with previous theories about the positive impact of health expenditure on economic growth. The results also confirm the Scheffler's assertion, that rich countries have a higher elasticity of health care expenditure at GDP growth than developing countries.