Public HEs, diminishing returns, and life expectancy in Latin American and Caribbean countries: a panel data analysis

Abstract

Introduction: The healthcare literature supposes the health status as a production function composed by economic, demographic and epidemiological factors. According to Grossman’ health production model, the health status should experience diminishing returns to increases in those factors. Objective: The goal of this study is to examine whether the life expectancy at birth experiences diminishing returns to increases in fiscal healthcare expenditures using Latin American and Caribbean countries data. Method: To analyze non-linear specifications between life expectancy at birth and public spending on health, we used different panel data settings with annual data. Results: Unlike a previous finding for this region, the main outcome is that life expectancy at birth presents diminishing returns to increases in public spending on health, which is consistent with Grossman’s health production framework. Conclusion: The evidence indicates that life expectancy at birth is less sensitive to changes of public health expenditures, showing diminishing returns. This found might be used as an input to make better decisions on fiscal sources allocation to health.