Financial Development, Governance, and Environmental Pressures in Health Expenditure Dynamics, Evidence from DCE and Asymmetric NARDL Models

<ns3:p>Background Rising health expenditure has become a persistent challenge in middle-income economies. Rapid industrial growth, expanding financial systems, and weak environmental controls place growing pressure on public and private healthcare budgets. Understanding how finance, governance related channels, and environmental stress interact with health spending remains limited. Motivation You need evidence that links economic structure, environmental pressure, and financial development to health expenditure over the long run. This study responds to that gap by examining lower-middle- and upper-middle-income countries over the period 1995 to 2023, with attention to asymmetric and cross-country dynamics. Findings Health expenditure rises with industrialisation, foreign direct investment, carbon dioxide emissions, financial development, and trade openness. A 10 percent increase in industrial output raises health spending by about 1.8 percent. The same increase in foreign direct investment and trade openness increases health spending by roughly 1.5 percent and 1.6 percent. Carbon dioxide emissions exert the strongest effect. A 10 percent increase raises healthcare costs by nearly 6.7 percent. Renewable energy consumption reduces health expenditure. A 10 percent increase lowers health spending by about 1.7 percent. Results remain stable under DCE, DCE-IV, and asymmetric NARDL estimations. Implications You should treat health expenditure as a downstream outcome of financial expansion, environmental stress, and governance related policy choices. Stronger environmental regulation, cleaner energy transition, and finance aligned with sustainability can ease long-run healthcare burdens. Integrating health, energy, and financial policies can support fiscal stability and sustainable development in middle-income economies.</ns3:p>