Health Care Expenditure and Economic Growth in Southern Italian Regions : An Empirical Analysis

This paper investigates the link between health expenditure and GDP for the regions of Southern Italy in the period 1980-2009 using a time series approach. The study moves from an introduction and a review of the economic literature on this subject; afterwards, we discuss the data and introduce some econometric techniques. The unit root and stationarity tests reveal that both health care expenditure and GDP series are I(1), for all regions. Moreover, we find everywhere a cointegration relationship between these variables. The short-term dynamic shows that the causality flow is bidirectional in six out of eight cases, as well as in the long term a causal bidirectional relationship (or "feedback effect") between the two series exists. As a result, we conclude that health care spending is a limiting factor for economic growth in Southern Italy regions