Impact of Demographical Structural Change on Public Health Care Expenditure in Malaysia

Main Article Content

Wong Sing Yun


The main objective of this paper is to shed light on the empirical relationship between demographic structure and public health care expenditure. A voluminous literature had pointed out the significant impact of demographic changes on public expenditure. Some of the scholars had attributed the growth effects of certain public expenditure to the age-specific effects, others recognized it as the age-transition effects. On a separate note, past researches had identified the aging population as a contributing factor to the increasing health care expenditure. Therefore, this paper empirically examines how the public health care expenditure in Malaysia responds to the population changes using the Autoregressive Distributed Lag (ARDL) Bounds testing approach. Empirical evidence from this finding demonstrated that the demography structure has a significant positive relationship with public health care expenditure. Hence, highlighted the existence of generational conflict in the allocation of health care expenditure. Besides that, bi-directional causality was found running between public health care expenditure and government education spending. This confirmed the correlation between these expenditures. The results also provide important implications that need to be taken into consideration by Malaysian policymakers when developing policies. 

Article Details

How to Cite
Yun, W. S. (2021). Impact of Demographical Structural Change on Public Health Care Expenditure in Malaysia. Asian Journal of Applied Economics, 28(2), 21–42. Retrieved from
Research Articles


Abeng, M.O. (2015). Determinants of non-debt government expenditure in Nigeria. Central Bank of Nigeria. Economic and Financial Review, 43(2), 37 – 71.

Ahn, N., Herce, J. A., & Garcia, J. R. (2005). Demographic uncertainty and health care expenditure in Spain (Working Paper 2005-07). Madrid: FEDEA.

Auerbach, A., Hagemann, R., Kotlikoff, L., & Nicoletti, G. (1989). The dynamics of an aging population. The case of four OECD countries (Working Paper Series NBER No. 2797). Massachusetts: National Bureau of Economic Research.

Baharin, R., & Saad, S. (2018). Ageing population and health care expenditure: Evidence using time series analysis. Jurnal Ekonomi Malaysia, 14(4), 65-73.

Bogetic, Z., Onder, H., Onal, A., Skrok, E., Schwarts, A., & Winkler,H. (2015). Fiscal policy issues in the aging societies (Discussion Paper MFM Global Practice No.1). Washington, DC: World Bank.

Borge, L-E., & Rattsø, J. (1995). Demographic shift, relative costs and the allocation of local public consumption in Norway. Regional Science and Urban Economics, 25(6), 705 -726.

Borge, L-E., & Rattsø, J. (2008). Young and old competing for public welfare services (CESifo Working Paper No. 2223). Munich: Center of Economic Studies.

Busse, M., & Hefeker, C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23, 397 – 415.

Cantarero, D. (2005). Decentralization and health care expenditure: The Spanish case. Applied Economic Letters, 12, 963 – 966.

Chakrabarti, A., & Joglekar,R. (2006). Determinants of expenditure on education: An empirical analysis using state level data. Economic and Political Weekly, 41(15), 1465-1472.

Chor, F.T. (2010). The determinants of health expenditure in Malaysia: A time series analysis. (MPRA Paper No. 24356). Munich: University Library of Munich.

Chor,F.T. (2013). A note on the health-growth nexus in Malaysia. Journal of Health Management, 15(3), 345 – 352.

Chor, F.T., & Lai, Y.W. (2011). The causal relationship between health and education expenditures in Malaysia. Theoretical and Applied Economics, 8(561), 61 – 74.

Christiansen, T., Bech, M., Lauridsen, J., & Nielsen, P. (2006). Demographic changes and aggregate health-care expenditure in Europe (ENEPRI Research Reports No. 32). European Network of Economic Policy Research Institutes.

Cutler, D.M., Elmendorf, D.W., & Zeckhauser, R.J. (1993). Demographic characteristics and the public bundle. (NBER Working Paper No. 4283). Massachusetts: National Bureau of Economic Research.

Echevarria, C.A. (1995). On age distribution of population, government expenditure and fiscal federalism. Journal of Population Economics, 8(3), 301 – 313.

Economic Planning Unit (EPU) (2021). Population & labour force. Retrieved from

Foot, D.K. (1984). The demographic future of fiscal federalism in Canada. Canadian Public Policy, 10(4), 406-414.

Foot, D.K. (1989). Public expenditures, population aging and economic dependency in Canada, 1921–2021. Population Research and Policy Review, 8(1), 97 – 117.

Getzen, T.E. (1992). Population aging and the growth of health expenditures. Journal of Gerontology, 47(3), 98–104.

Gradstein, M., & Kaganovich, M. (2004). Aging population and education finance. Journal of Public Economics, 88(12), 2469–2485.

Gbesemete, K.P., & Gerdtham, U.G. (1992). Determinants of health care expenditure in Africa: A cross-sectional study. World Development, 20(2), 303 – 308.

Grob, U., & Wolter, S.C. (2005). Demographic change and public education spending: A conflict between young and old? (CESifo Working Paper No.1555). Munich: Center of Economic Studies.

Holtz-Eakin, D., Lovely, M.E., & Tosun, M.S. (2004). Generational conflict, fiscal policy and economic growth. Journal of Macroeconomics, 26(1), 1 -23.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169 – 210.

Ke, X., Saksena, P., & Holly, A. (2011). The determinants of health expenditure: A country-level panel data analysis (Working Paper December 2011). World Health Organization.

Kelley, A.C. (1976). Demographic change and the size of the government sector. Southern Economic Journal, 43(2), 1056-1066.

Khan, H.N., Razali, R.B., & Shafie, A.B. (2016). Modelling determinants of health expenditures in Malaysia: Evidence from time series analysis. Front Pharmacol, 7(69), 1–7.

Korwatanasakul, U., Sirivunnabood, P., & Majoe, A. 2021. Demographic transition and its impacts on fiscal sustainability in east and Southeast Asia. (Working Paper Series No. 1220). Asian Development Bank Institute.

Kurban, H., Gallagher, R.M., & Persky, J.J. (2015). Demographic changes and education expenditures: A reinterpretation. Economics of Education Review, 45, 103-108.

Luski. I., & Weinblatt, J. (1998). A dynamic analysis of fiscal pressure and demographic transition. Applied Economics, 30(11), 1431–1442.

Mendelson, D.N., & Schwartz, W.B. (1993). The effects of aging and population growth health care costs. Health Affairs, 12(1), 119–125.

Mohapatra, G, Giri, A.K., & Sehrawat, M. (2016). Foreign aid, macroeconomic policies and economic growth nexus in India: An ARDL bounds testing approach. Theoretical and Applied Economics, 4(609), 183–302.

Musgrave, A.R., & Musgrave, P.B. (1989). Public finance in theory and practice (5th ed.). New York: McGraw Hill.

Okafor, C., & Eiya, O. (2011). Determinants of growth in government expenditure: An empirical analysis of Nigeria. Research Journal of Business Management, 5(1), 44 -50.

Pesaran, M.H., Shin, Y., & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289 – 326.

Preston, S.H. (1984). Children and the elderly: Divergent paths for America’s dependents. Demography, 21(4), 435–457.

Poterba, J. M. (1997). Demographic structure and the political economy of public education. Journal of Policy Analysis and Management, 16(1), 48-66.

Policy Council. (2012). Potential long term implications of demographic and population change on the demand for and costs of public services. States of Guernsey: Policy and Research Unit.

Rahman, T. (2008). Determinants of public health expenditure: Some evidence from Indian states. Applied Economics Letters, 15(11), 853 – 857.

Richman, H. A., & Stagner, M.W. (1986). Children in an aging society: Treasured resource or forgotten minority? The Aging Society, 115(1), 171-189.

Shiu, Y.M., & Chiu, M.C. (2008). Re-estimating the demographic impact on health care expenditure: Evidence from Taiwan. The Geneva Papers, 33, 728 – 743.

Stromberg, D. (1998). Demography, voting, and local public expenditures: Theory and evidence from Swedish municipalities. Stockholm: Stockholm University.

Ukwueze, E.R. (2015). Determinants of the size of public expenditure in Nigeria. SAGE Open, 5(4), 1-8.

World Bank. (2021). World development indicators database. Retrieved from

Yap, K.W., & Selvaratnam, D.P. (2018). Empirical analysis of factors influencing the public health expenditure in Malaysia. Journal of Emerging Economies and Islamic Research, 6(3), 1-14.

Yong, K.C. (2015). Socioeconomic determinants of health enhancing expenditure among the elderly in Malaysia: An ethnic comparison. Jurnal Ekonomi Malaysia, 49(1), 93-102.

Yun, W.S., & Yusoff, R. (2018). The Determinants of public education expenditure in Malaysia. Jurnal Ekonomi Malaysia, 52(2), 109–122.

Zweifel, P., Felder, S., & Meiers, M. (1999). Ageing of population and healthcare expenditure: A red herring? Health Economics, 8(6), 485–496.

Zweifel, P., Felder, S., & Werblow, A. (2004).Population ageing and health care expenditure: New evidence on the “Red Herring”. The Geneva Papers on Risk and Insurance, 29(4), 652–666.