What Derives Public Health Expenditures in Saudi Arabia? Macro-Econometric Analysis

This study aims to investigate the short and long-term relationships of the public healthcare expenditures with its determinants in Saudi Arabia, over the period from 1980 to 2013. The study results show that there exist positive and significant long term relationships between gross domestic product (GDP), number of physicians per 1000 population, health consumer price index (CPI), and percent of population aged 65 or elder with public health expenditures. The results of the error correction model (ECM) also confirm that all the explanatory variables have significant effects on the level of public health expenditures, except health CPI due to its slow growth rate during the study period. Moreover, the model results indicate that whenever the system is out of equilibrium, it is restored back with speed of about 81.6 percent in a year. The results of both short and long-term models confirm that health is a necessity in Saudi Arabia and not a luxury good. Based on these results, the study provided three recommendations to improve the public health services.