The Effect of Environmental Degradation on the Financing of Healthcare

Empirical work on the relation between health expenditure and environmental degradation is based predominantly on the ARDL approach to co-integration and to a lesser extent on panel co-integration as applied to a log-log specification. The results invariably show that environmental degradation has a positive effect on health expenditure. In this article, we examine the bivariate relation between environmental degradation and health expenditure, since this relation seems to hold strongly, which can be explained in terms of the environmental Kuznets curve. We cast a shadow of doubt on the practice of using the log-log specification without any theoretical or empirical justification. Our results show that the relation between health expenditure and environmental degradation can be either positive or negative, depending on the level of per capita income.