Healthy, educated and wealthy: a primer on the impact of public and private welfare expenditures on economic growth

In this paper, we provide first evidence of the impact of public and private expenditures in health and education on economic growth, via their influence on people’s health, skills and knowledge. We consider a growth accounting framework in order to test whether countries that devote a larger amount of resources to the consumption of health and educational services experience higher growth rates.We also test whether the effects on economic growth of public expenditure in health and education differ from those of private expenditure. Our empirical analysis is based on a panel of 19 OECD countries observed between 1971 and 1998. The results are consistent with the hypothesis that health and education expenditure affects positively growth. The estimated impact is stronger for health than for education. More importantly, we find some evidence that public expenditure influences GDP growth more than private expenditure.