Interaction of health expenditure and the Thai economy

Abstract

In determining appropriate policy, leaders in developing countries constantly face with the dilemma of how to allocate money between social and economic development. It has been long accepted that the two factors are closely linked. A prosperous economy will reap higher tax revenues, providing governments with the financial means to provide social programs to the public. Improved social factors, such as education and health, will make the labor force more productive, which, in turn, promotes improved economic development. This research formulates a macroeconometric model of the Thai economy, with particular emphasis on the health care sector, to test and compare various policy programs in medical care or other industries. In particular, the model is used to test the effect of the recent universal coverage scheme, implemented in late 2001. The methodology utilizes a two-staged least squares (TSLS) approach to estimate the 20-equation model. Quarterly data are acquired from several sources, including the Ministry of Public Health, the National Economic and Social Development Board, the National Statistics Office, and the Bank of Thailand. The results from these tests show that the universal coverage scheme has little influence on health status, but instead shows significant effects on spending patterns medical care. Improvements directed at the provision of health care services, such as investments in medical technology or the accessibility of medical personnel, shows decided improvements in health but very slight affect on the economy. Government expenditures in health, however, prove the most effective policy for improving Thailand’s health and economy.