The dynamic relationship among health expenditures, carbon emissions, and economic growth: evidence from G7 countries using wavelet coherence analysis

This study examines the dynamic interrelationships between healthcare expenditures, carbon dioxide (CO₂) emissions, and economic growth in G7 countries over the period 1970–2022. While previous research has largely focused on the binary relationships between these variables, this study takes a comprehensive approach by simultaneously considering all three. Using Wavelet Coherence and Partial Wavelet Coherence (PWC) methodologies, the study reveals time-varying interactions at different frequencies. The findings reveal a negative relationship between CO₂ emissions and health expenditures in most G7 countries. This result may initially seem counterintuitive, as greater pollution might be expected to lead to poorer health outcomes and, consequently, higher healthcare costs. However, the negative relationship between CO₂ emissions and healthcare expenditures in most G7 countries likely reflects a positive environmental transformation. Moreover, a positive relationship between CO₂ emissions and healthcare expenditures was found in Japan, both in the short- and long-term. Furthermore, the study demonstrates that economic growth significantly influences the relationship between CO₂ emissions and healthcare expenditures. This highlights the need to consider the broader economic context in the relationship between these two variables. Consequently, this study highlights the need for integrated policy approaches that align environmental sustainability with health care and economic planning.