Examining the Effect of Economic Sophistication on Public Health Expenditure? Evidence from a Global Sample

Do sophisticated countries spend more on health? This paper endeavors to analyze, for the first time, the extent to which the mix of products a country produces and exports, measured by the economic complexity index, determines public health expenditure. Empirical analyses based on an Instrumental Variable approach from a sample of 116 countries over the period 2002-2019 consistently show that countries exporting complex products on average spend more on health than their counterparts with economic structures mainly based on simple products with low productivity. Complementary analyses show that the effect of economic complexity on public health spending is a function of income level, political regime, and type of democracy. Specifically, results show that although the effect of economic complexity on public health expenditure on average is positive in all subsamples, the effect is greater in high-income countries, democratic countries, and countries with parliamentary democracies. Furthermore, there exist evidence that some key channels via which economic complexity improves public health expenditure are the so-called resource curse and economic growth. It flows from these results that government health expenditure may be increased by diversifying the productive structure toward the production and export of highly sophisticated products.