Implications of Aging Population and Health Spending for Thai Economic Growth

With the increasing aging population, the foreseeable growth in the associated medical-care demand and health spending has posed a tremendous challenge for the sustainability of public finance in Thailand. This study empirically examines the relationships between economic growth, health expenditure, life expectancy, and the aging society using the Bayesian Vector Autoregressive (BVAR) model. This model also enables us to compute the impulse response functions (IRFs) to empirically examine the dynamic relationships between these four variables. Our findings reveal strong dynamic impacts of economic growth on health expenditure, life expectancy, and the aging society. We also find that health expenditure in lag 2 also has a large effect on economic growth, life expectancy, and the aging society. In terms of the impulse response, we find a pronounced response from health spending to economic growth and the aging society.