Health Expenditure and Life Expectancy: Cross-Country Panel Evidence on the Moderating Role of Education and Infrastructure

This paper revisits the relationship between health expenditure and life expectancy by distinguishing between cross-country moderation patterns and within-country temporal evidence. Using cross-sectional data for 111 countries in 2019 alongside two-way fixed effects panel models covering 2010–2019 with one-year lagged covariates, the study examines whether adult literacy and electricity access moderate the health expenditure–longevity association. In cross-sectional data, the association between health expenditure and life expectancy is more pronounced in countries with higher literacy and greater electricity access, consistent with a complementarity hypothesis. These interaction patterns are not recovered with statistical precision in within-country fixed effects models. Adult literacy and electricity access remain positively associated with within-country changes in life expectancy, but the health expenditure coefficient is imprecise in the panel setting, reflecting limited within-country annual variation in spending after absorbing country fixed effects. The findings are more consistent with a structural and long-run interpretation of these complementarities than with a short-run within-country dynamic, while also highlighting the limits of short-panel identification for slow-moving national characteristics.