The Relationship Between "Protect People's Livelihood" and "Promote the Economy:" Provincial Evidence From China

Abstract

This study focused on medical care in a single country (China) and in regions with different economic backgrounds and different economic development levels to determine the effect of healthcare expenditure on short- and long-term economic growth. The study supported some interesting conclusions: (1) For most areas of China, increasing healthcare expenditure has a negative impact on economic growth in the short term but promotes growth in the long run; (2) Under different levels of economic development within China, there is significant heterogeneity in the interaction between healthcare expenditure and economic growth; (3) The negative effects of healthcare expenditure on short-term economic growth are greater during periods of economic turbulence than during times of stability; and (4) Healthcare expenditure has a negative effect on underdeveloped areas through the accumulation of material capital, while in economically developed areas, this channel has the opposite effect. To improve the quality of medical and health protection and the quality of life and welfare, China needs to consider the development characteristics of different economic zones and establish a multilevel, systematic and diversified medical and health protection system.

Keywords: China; economic growth; healthcare expenditure; time-varying; transmission channel.

Figure 1

Three-dimensional impulse response of China's short-term economic growth in different regions. Each subfigure with the title of “X → Y” demonstrates the response of variable Y to an orthogonalized positive shock to variable X. In other words, X is an impulse variable, and Y is a response variable. One period in the figure denotes one season.

Figure 2

Three-dimensional impulse response of China's long-term economic growth in different regions. Each subfigure with the title of “X → Y” demonstrates the response of variable Y to an orthogonalized positive shock to variable X. In other words, X is an impulse variable, and Y is a response variable. One period in the figure denotes one season.

Figure 3

Robustness test results: change in the selection of the variable lag order. The results shown in the figure are for the second-order lag. Due to space limitations, the empirical results of the remaining lagged orders are not listed individually but maintained for reference. Each subfigure with the title of “X → Y” demonstrates the response of variable Y to an orthogonalized positive shock to variable X. In other words, X is an impulse variable, and Y is a response variable. One period in the figure denotes one season.