Environment was becoming a variable that government policies have to consider, there’s no doubt about that. Indeed, as Chief Seattle said from 1854: “This we know… the earth does not belong to man, man belongs to earth. All things are connected, like blood which connects one family. Whatever befalls the earth befalls the children of the earth. Man did not weave the web of life – he is merely a strand in it. Whatever he does to the web, he does to himself.” This present article written by two Australian economist professors try to show that environmental quality influence significantly health expenditures. The authors have selected a panel of eight OECD countries to test their assumptions. Indeed, if the literature examining the determinants of health expenditure is abundant, never the impact of the environment has been studied before. That’s why; on top of deal about current issues this article is interesting because it’s the first to include the environmental variable in an econometric model. We’ll begin to see in which scope and under which conditions they tried to show the role of environmental quality on health expenditures and then we’ll analysis the results and draw some implications. Finally, we’ll observe what it is about Ireland.
Paresh Kumar Narayan and Seema Narayan, the two authors start their reasoning drawing a report: “costs of environment contamination are undebatable and put increased strain on government budgets”. Indeed, nowadays government policies have to take the citizen environment quality into account. Economically speaking, pollution affects negatively human health and that can have dramatic repercussions on labour productivity for one side and on health expenditures for another side and then consequently on the growth. Also, environmental quality has an influence on some raw materials and can conduct to a certain scarcity if we don’t pay attention to their utilization (oil for example) and consequently affects negatively the economy. Otherwise, damages relating to the ecosystem are huge. Several authors had already showed that since few years. To find what they expect, the researchers needed to build a model which take environment quality into account, thing which was never do before. Broadly speaking, air pollution is considered as the main source of environmental cost. That’s why they had chosen to adopt carbon monoxide emissions, sulphur oxide emissions and nitrogen oxide emissions to measure the environmental quality impact. Therefore, we can wonder why the authors didn’t take the Kyoto’s criteria (Carbone dioxide, Methane and Nitrous) considered as the 3 main greenhouse gases. They analysis also the income as factor which can play a role on health expenditures. Thus, using econometric estimation techniques they had implemented their model to 8 OECD countries (Austria, Denmark, Iceland, Ireland, Norway, Spain, Switzerland and UK). Besides, we can also regret this panel choice which cannot permit to draw a general conclusion about the OECD countries and even about the European countries. Nevertheless, the authors explain this sample was dictated by data availability and it’s the first time environmental quality is analysis on health expenditures so this experience deserve attention. The economists wanted to show two things in their article: firstly, to examine the role of environmental quality in determining health expenditures and secondly, to undertake a panel cointegration approach to studying this issue. We’ll focus on the first point.
Thus, to analysis the results we’ll distinguish short run and long run results. For the long run, the authors found income had an elastic and significant positive impact on health expenditures, then sulphur oxide emissions and carbon oxide emissions had also a significant impact but inelastic. In the short run, only income and carbon monoxide are significant. Nitrogen was statically insignificant for both cases. Moreover, the one period lagged error correction include in the model suggest that following a shock to the system, it takes about eight years for health expenditures to revert their equilibrium. As we expected, the effect of air pollution on health expenditures is existing. The authors draw up a pessimistic report linking their results and the economic growth. Indeed if the growth can increase the GDP, the incomes etc… It also source of a rise of gasoline, diesel, fuel oil and so on… Results found imply that the economic growth that we currently know will bring environmental conditions degradation, heighten the health diseases and consequently raise the health expenditures. Thus, they point an accusing finger on “this” growth which neglect too often the environmental aspect in favour of the profitability only and cause non reversible damages. They advise utilization of cleaner fuel and wish a bigger place for the health management within the enterprises. Broadly speaking, they wish a new type of growth, greener and consequently healthier boosted by the enterprises themselves on one side and by the policies makers on another side. Indeed, in the last part of their article, the authors call the governments to include environmental issues in their health policy and, in concrete terms, reserve a more important part of the budgets to the environmental quality at the risk of seeing their health expenditures rising again. OECD countries have already a high level of health expenditures and could see this one increase again if they don’t take quickly and seriously this problem. Actually, we can speak about a vicious circle since the environment budget part goes to care for those affected from environment damages, thus there is less money for reducing pollution and health care expenditures increase. The next environmental summit in Copenhagen in December will try to deal with these issues, while Kyoto process will take end in 2012, and will appear already as a climatic ultimatum. Otherwise, one of the most important points will be the US ratification…
The Ireland is, as for it, of course, also confronted to environmental issues. We’ll deal only about air pollution related in the article even if it’s important to notice that the water pollution is also one of the most important environmental issues in the country. Thus, “Ireland has one of the higher emissions of greenhouse gases in Europe per capita, a situation attributable in part to the limited capacity for hydropower development and a policy not to avail of nuclear power” according to the Department of the environment, heritage and local government. Indeed, its emissions exceed the Kyoto’s limits but unfortunately like the majority of the European countries. Meanwhile, the health expenditures had increased and almost doubled between 1997 and 2005. Obviously, lots of factors must be taken in account like population increasing, ageing… and not only environment quality. But we can regret that in the last pre-budget Outlook the part reserved to the environment will not increase for the three next years and represent only 1,56% (875,897,000�) of the Total Gross Voted Current Expenditure(55,992,807,000 �) . The efforts that Ireland must provide are still substantial as most of the countries to truly change the things. Indeed, as Al Gore said, wanting shocked: “The struggle to save the global environment is in one way much more difficult than the struggle to vanquish Hitler, for this time the war is with ourselves. We are the enemy, just as we have only ourselves as allies.” So, now we can just hope that the exit will be the same, everything is in our hands.