Objective: The deterioration in environmental quality has an economic and social cost. The aim of this study is to analyze the impact of environmental factors on health expenditures in developing countries.
Method: To analyze the relationship between environmental quality (air pollution and temperature) and health expenditure in thirty-three developing countries, the study uses system generalized method of moments (GMM) using data from 2000 to 2017.
Results: The results suggest a positive effect of both air pollution and temperature on health expenditure. However, the effect is highest for government health expenditure, followed by private and total health expenditure in the studied countries. The results further suggest that the impact of environmental factors is greater in higher-income countries when we divide the studied countries into two groups, i.e., higher- and lower-income countries.
Conclusion: Our results are interesting and informative for the policy makers to design such policies to attain better environmental quality and social well-being. The increased healthcare expenditures due to increased air pollution and climate change necessitate for an efficient, reliable, affordable and modern energy policy by emphasizing the use of clean and renewable energy in these countries that ensure better health for the masses. Furthermore, a smart and sustainable environmentally friendly economic growth policy is necessary to ensure better health for the masses.
Keywords: air pollution; developing countries; generalized method of moment (GMM); health expenditures; temperature.