The Relationship Between Health Expenditure, CO(2) Emissions, and Economic Growth in G7: Evidence from Heterogeneous Panel Data

Τhe current paper examines the relationship between per capita health care expenditures, per capita CO(2) emissions, and per capita gross domestic product (GDP) in G7 countries. At the beginning, we examine the cross-sectional dependence and the slope homogeneity between the countries. Then, the second-generation unit root test is applied using the Pesaran, CIPS (2007) test, while for the cointegration test, the Westerlund (Oxford Bulletin of Economics and Statistics 69(6):709-748, 2007) test was applied. The long -run panel cointegration coefficients were analyzed with the augmented mean group (AMG) estimators, which allow the cross-sectional dependence and heterogeneity. Finally, the test by Dumitrescu and Hurlin (Economic Modelling 29(4):1450-1460, 2012) was used in order to check for causality taking into account the heterogeneity and cross-sectional dependence on panel data. The preliminary analyses show that variables are cross-sectional-dependant and heterogenous and are first-order stationary. Cointegration test by Westerlund (Oxford Bulletin of Economics and Statistics 69(6):709-748, 2007) which allows heterogeneity and cross-sectional dependence show that there is a stable and long-run relationship between variables. Moreover, the long-run coefficients which were estimated with the AMG approach are found to be statistically significant and positive for the GDP per capita, and negative in the case of greenhouse gas emissions per capita. Finally, causality test by Dumitrescu and Hurlin (Economic Modelling 29(4):1450-1460, 2012) revealed a unilateral causality from greenhouse gas emissions per capita towards health expenditure per capita for all G7 countries.