Empirical Economic Bulletin, An Undergraduate Journal


The current level of health spending in the U.S. is the highest in the world. However, the outcomes of the health spending are among the lowest for developed countries. Therefore, for policy development purpose, it is necessary to determine which direction of healthcare spending results in better output, private or public. This paper investigates the effect of private and public health expenditure on life expectancy, infant mortality at birth, and infant mortality under age 5 among 11 OECD countries. Hausman test is performed to confirm the fixed effects models. Fixed effects GLS and GMM are used for data analysis. We find that both public and private healthcare spending are not meaningful, but number of physicians has great impact on health outcomes. Statistical insignificance and extremely low coefficients of health spending variables signal over-spending and cost inflation issues of healthcare. This may be especially true for the U.S. and might explain lackluster health outcome despite the highest healthcare spending in the world.