The relationship between health care, education and economic growth: OECD countries application

This paper aims to investigate relationship between health expenditure, education expenditure and economic growth for Turkey and OECD countries (Organization for Economic Cooperation and Development) using annual data in period from 1995 to 2013. In this study three models were established related to investigate affect health expenditure, education expenditure and economic growth and these models have been investigated with a four-stage econometric methods. In the first stage, stationary analysis were performed for varaibles acording to Levin Lin Chu, Hadri, Breitung, Im Pesaran Shin, Fisher ADF and Fisher PP unit root tests. Five of the six unit root tests show that series have unit root at level but in the first difference they are stationary at 1% significance level. In the second stage, the existence of long-run relationship between varaibles were investigated by Pedroni panel cointegration and Kao panel cointegration test. Both cointegration test have determined long-run relationship between variables at 5% significance level. In the third stage, causality relationships between variables was investigated by Dumitrescu-Hurlin the panel causality test. Acording to causality test there are bidirectional causality relationships between health expenditure, education expenditure and economic growth. In the fourth stage, in the line with established model both for panel and countries long-run coefficient between varaibles were estimated by Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS). Acording to FMOLS and DOLS on the basis of panel health expenditure, education expenditure and economic growth affect each other positively. Key Words: Economic Growth, Health Expenditure, Education Expenditure, Fully Modified Ordinary Least Squares (FMOLS).