Public Health Expenditure, Human Capital, and Economic Growth in South Asia: Panel Data Evidence

Abstract

This study examines the long-run relationship between public health expenditure, human capital, and economic growth in South Asian economies from 1995–2024. Public health spending is a key policy instrument for human capital formation, which plays a central role in sustaining economic growth. South Asia faces persistent health and development challenges, making this relationship policy relevant. Using balanced panel data for seven countries, the study applies panel unit root tests, Pedroni panel cointegration tests, Granger causality analysis, and long-run estimators including FMOLS, panel OLS, and DOLS. Economic growth is measured by GDP per capita, while human capital is proxied by HDI, labor force participation, life expectancy, and infant mortality. The findings confirm a stable long-run cointegrating relationship. Public health expenditure and key human capital indicators exert a positive and significant impact on economic growth. Short-run causality runs from growth to health expenditure. Policymakers should ensure sustained and efficient public health investment to strengthen human capital and support long-term growth.