Does Carbon Emission Matter for Health Care Expenditure? Evidence from SAARC region using Panel Cointegration

This study investigates the impact of increased carbon emissions on per capita health expenditure exploiting the panel data with Engle – Granger based cointegration test, Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) method. Data for the South Asian Association for Regional Cooperation (SAARC) countries from 1995 to 2014 have been collected from World Development Indicators (WDI). The confirmation of integration order of the variables has been made using two panel unit root tests suggested by Im – Pesaran – Shin, 2003 (IPS) and Levin, Lin & Chu, 2002 (LLC). Following the procedure suggested by Pedroni (1999, 2003) and Kao (1999), existence of long run relationship has been examined among the variables. Application of Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) further confirmed the presence of long run significant positive relationship between carbon emissions and per capita health expenditure. The coefficients of carbon emissions varied from 0.246 to 0.355 under the model estimated by FMOLS while the coefficients varied from 0.198 to 0.283 under the model estimated by DOLS. The findings can be generalized by saying that increased carbon emissions due to environmental degradation would increase the health expenditure as well as cost of the nations.