THE NEXUS AMONG HEALTH EXPENDITURE, EDUCATION EXPENDITURE AND ECONOMIC GROWTH IN UK

The primary aim of this study is to investigate the causal link among economic growth and governmental health and education expenditure in the United Kingdom, employing data from 1971 to 2022. The main innovation of the paper is the application of the wavelet coherence approach, allowing investigation of both long-run and short-run causal linkages between the indicators. To our knowledge, this approach has not been previously utilized for this purpose, which fills the gap in the literature. By using WC, our research uniquely captures how the co-movement between these indicators changes over time and across different frequencies, providing a more comprehensive understanding of their short-run and long-run interactions, which cannot be achieved with traditional econometric methods. The findings confirm that (i) all series are integrated at the first difference (ii) each economic indicator contains structural break at different years, (iii) the wavelet estimation results confirm the link between economic growth and health expenditure over the years at varying scales, (iv) the causality is unidirectional from economic growth towards education expenditure in both short and long-run, (v) the causal link between education expenditure and health expenditure varies depending on the scale, (vi) wavelet coherence test results are confirmed through causality test of the Toda-Yamamoto. The main findings of our study have revealed that economic growth causes governmental expenditure on health first, and then health expenditures cause expenditure in education, in the case of the United Kingdom, which can be a guide for policymakers to design appropriate policies to achieve sustainable economic growth.